Britain will avert recession this year as eye-watering inflation cools, a boost for Jeremy Hunt
Britain will avoid recession this year as eye-watering inflation cools, a boost for Jeremy Hunt.
Last week, the Chancellor said the economic outlook looked “better than expected” in response to the IMF’s gloomy forecasts.
Now, in a vote of confidence for Hunt, economists at EY have supported the view that a recession is not imminent. Britain is expected to record 0.2 percent growth this year, a marked improvement on the -0.7 percent contraction economic forecasters predicted in January.
The economy will level off in the first half of 2023, but will improve from the summer when falling wholesale energy prices will dampen inflation.
“The UK economy seems to be turning, albeit very slowly,” said Hywel Ball, chairman of EY UK. It comes on the heels of better-than-expected GDP in the last quarter of 2022 and signs that inflation will ease over the course of the year.
Boost: The economy will level off in the first half of 2023 and improve from the summer
Hunt pointed to growth for the three months to February, although gross domestic product (GDP) remained flat in February after growing 0.4 percent in the previous month, due to public sector strikes ravaging the construction sector.
The Chancellor also said the UK would avoid a recession, which is defined as two consecutive quarters of contracting GDP. He told IMF director Kristalina Georgieva that he was “very focused on proving you wrong,” at the body’s meeting in Washington last week.
Although the IMF raised its forecast for the UK’s GDP for 2023 and 2024, the financial agency said the UK would have the worst growth of any major industrialized economy. But in a sign of relief for households, EY’s ITEM Club said inflation would fall below 3 percent by the end of 2023, an improvement on the January forecast of just under 4 percent.
Analysts are predicting inflation to break out of the double digits for the first time since last summer when March data was released on Wednesday.
Headline inflation unexpectedly rose to 10.4 percent in February from 10.1 percent in January, following record increases in grocery items due to salad shortages.
EY says the economy is not out of the woods yet and the British are still feeling the pinch. Still, news that the economy is performing better than expected “could spur an uptick in business and consumer confidence,” Ball said.