As of: 02/10/2023 4:03 p.m
With zero growth in the fourth quarter of last year, the British economy narrowly avoided a recession. However, experts continue to believe that a recession is likely for the current year.
The British economy has avoided a recession for the time being. The gross domestic product (GDP) stagnated in the final quarter compared to the summer, as the statistics office ONS announced today. In the summer, GDP had still fallen slightly by 0.2 percent, so that the economy narrowly avoided slipping into recession.
Treasury Secretary Jeremy Hunt said the data showed the economy was more resilient than expected but not yet over all dangers. A technical recession occurs when a country’s GDP falls for two straight quarters.
Economy contracted sharply in December
In 2022 as a whole, the British economy grew by four percent. The country is the only one of the G7 industrial nations whose GDP has not yet reached pre-crisis levels. Economic output is still 0.8 percent below the pre-corona level. For comparison: Germany had already exceeded the level before the pandemic by 0.7 percent in December.
The economy weakened at the end of 2022 in particular. In December alone, GDP fell by 0.5 percent, more than expected at minus 0.3 percent. The decline was largely due to a wave of strikes in many areas of public service. There were also walkouts on Monday, this time by nursing staff.
“Recession remains the baseline scenario”
Many experts are assuming that Great Britain will soon be forced into a recession. ING Bank economist James Smith said he expects the economy to contract by 0.3 to 0.4 percent in the current quarter. The second quarter is also likely to go downhill, albeit at a slightly slower pace. “A recession – or at least a technical recession – remains the base case.” But it will be very mild in historical comparison.
The analysts at UniCredit also expect a noticeable economic slump in the first half of the year and little impetus from domestic demand. “Pressure on households’ real disposable income continues and consumer confidence is very low.”
Is a protracted recession imminent?
The Bank of England (BoE) forecast last week that the UK is headed for a mild but protracted recession. This should start in the first quarter of 2023 and last five quarters.
Above all, the government wants to fight the price surge. “We’re not out of the woods yet, especially when it comes to inflation,” said Treasury Secretary Hunt. “If we stick to our plan to halve inflation this year, we can be confident that we have one of the best growth prospects in all of Europe.” High inflation reduces people’s purchasing power. Inflation reached 11.1 percent in October, its highest level in 41 years.