According to a recent projection released by the British Chambers of Commerce (BCC), the nation’s economy is on pace to contract less than anticipated in 2023 and avoid the two consecutive quarters of negative growth that constitute a technical recession.
The better forecast was consistent with recent improvements in purchasing managers’ index (PMI) surveys, consumer confidence statistics, and other economic indicators for Britain.
With improved activity towards the end of 2022, the BCC predicted that the gross domestic product (GDP) would shrink by 0.3% in 2023, a lesser reduction than its prior prediction of a 1.3% dip.
After seeing zero growth in the last quarter of 2022, official figures revealed the economy narrowly escaped entering a recession.
However, in cheering news, the United Kingdom Office for National Statistics reported that GDP grew by 0.3% during January 2023, after shrinking by 0.5% in December 2022.
It’s a faster recovery than expected after the economy stalled in the 2022 final quarter.
Analysts had expected modest growth of just 0.1%, as the ongoing cost of living crisis prevented a recovery in consumer and business activities.
The latest GDP figure could give the Rishi Sunak government a slight boost before the upcoming budget, which will outline the country’s tax and spending policies.
Reuters surveyed economists last month, who predicted that the GDP would shrink by 0.4% in the first and second quarters and then by 0.1% in the third.
While the Bank of England (BoE) forecasted a quarter-percent decline for 2024 last month, the BCC anticipates a 0.6% growth in the GDP in 2019.
Alex Veitch, director of policy at the BCC, stated that despite the higher revision, businesses still face a challenging year due to challenges with employee shortages, rising taxes, and energy costs.
Veitch said that the economy might lag behind rivals if Chancellor Jeremy Hunt does not include incentives to boost businesses in his annual budget next Wednesday.
The official also claimed that the United Kingdom economy may still grow if Hunt supports them by taking action on childcare to relieve worker shortages and helping them manage their energy bills.
The BCC predicted that Britain’s economy would reach its pre-COVID size in the fourth quarter of 2024, making it the only G7 economy that has yet to recover to that level.
As double-digit inflation continues to hurt consumers and companies, the BCC anticipates a decline to 5% in the fourth quarter and 1.5% by late 2024.
British inflation decreased to 10.1% in January 2023, moving farther away from its peak of 11.1% in October 2022, although it is still more than five times the BoE’s 2% objective.
The BCC anticipates that the BoE will raise interest rates by a quarter point at the end of 2023, bringing them to 4.25%, and then lower them to 3.5% by late 2024.