The UK economy will probably skirt a recession but sputter through “anemic” growth in the year ahead due to lingering inflation, the British Chambers of Commerce.
(Bloomberg) — The UK economy will probably skirt a recession but sputter through “anemic” growth in the year ahead due to lingering inflation, the British Chambers of Commerce.
The business lobby group upgraded its forecast on Thursday, predicting gross domestic product will grow 0.3% this year instead of shrinking by the same amount. Inflation will remain above the Bank of England’s 2% target this year and next.
The outlook chimes with the central bank’s own estimate that the economy will grow 0.25% this year. While many forecasters have walked away from their expectations for a recession this year, the Office for Budget Responsibility is anticipating a 0.2% drop in GDP this year.
“We are on course to only narrowly avoid a recession,” said Vicky Pryce, senior member of the BCC’s economic advisory council. “With anemic growth rates predicted into the future, there is a real danger of slipping back into recession territory at any point.”
While inflation and higher interest rates continue to drag on growth, resilient household spending and buoyed business investment supported the BCC’s growth outlook for the UK.
More optimistic expectations may inform the BOE’s thinking when setting its key lending rate later this month. Investors are betting the BOE will continue its hiking spree this year after key inflation data showed the economy still running unexpectedly hot.
The BCC also expects:
- GDP to rise 0.6% in 2024 and 1% in 2025
- Inflation will slow to 5% in the fourth quarter of this year and 1.5% at the end of 2024
- Average earnings will grow 4.5% in 2023
- BOE’s key rate will peak at 4.75% in the second half of 2023, higher than the BCC’s previous forecast of 4.25% but well below market bets for a 5.5% peak
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