The National Institute of Economic and Social Research stated that the country is in the process of recovering from the triple shocks it experienced in the form of Brexit, the COVID pandemic, and now the latest Russian invasion of Ukraine in the last five years.
It further stated that inequality in income, unemployment, and the level of debt will surge by 2024.
As per the latest quarterly outlook by the researchers, the next year will continue to experience “elevated housing, energy, and food costs,” while the key indicator of a country’s outlook, the gross domestic product, or the GDP, will “barely grow”.
As of now, the GDP is at 0.5%, below the pre-pandemic level, and is expected to remain at that level for another year. However, it also cautioned that it was a “highly uncertain” outlook.
Warning further, the think tanks stated: “There are, in fact, even chances that GDP growth will contract by the end of 2023 and a roughly 60% risk of a recession at the end of 2024.”
Although it had been expected that the country would not experience a recession in 2022, the economic conditions made it “feel like” one.
In the wake of the 14th consecutive increase in the rate of interest, NIESR took a more pessimistic approach compared to the Bank of England.
While implying that the economy will effectively remain flat until 2026, the Bank was optimistic that the coming years will not experience any recession.
The chief economist, Huw Pill, also recently cautioned regarding the unlikelihood of prices of food declining and remaining at the pre-Russian invasion of Ukraine levels.
With regards to UK inflation, NIESR expected it to remain well above the Bank’s 2% target through 2025 and admitted that at the end of the year, it could fall to 5.2%.
The forecast also stated that real wages are expected to fall well below pre-pandemic levels by the end of 2024 in several regions of the UK.
Although the richest households will experience a 5% drop in their disposable incomes by 2024 when compared to the previous five years, the poorest households will drop by 17%.
NIESR’s deputy director for macroeconomic modeling and forecasting, Professor Stephen Millard, stated that the “triple supply shock” of Brexit, the COVID pandemic, and Russia-Ukraine were the critical factors resulting in the dire economic outlook.
He stated that “the monetary tightening that has been necessary to bring inflation down” was also among a few critical factors for the decline in the economy.
Professor Millard further added: “The need to address the UK’s poor growth performance remains the key challenge facing policymakers as we approach the next election.”
It follows Chancellor Jermy Hunt’s announcement regarding his plans to revive the UK economy.
He further conveyed to Sky News: “What you’ll see from me in the autumn statement is a plan that shows how we break out of that low growth trap and make ourselves into one of the most entrepreneurial economies in the world.”
- Published By Team Timeswire