Digital Zeitgeist – According To Economists’ Projections The Forthcoming Recession In The UK Might Be Far Worse Than Previously Thought
In contrary to the findings of other recent economic studies, the business consulting firm EY projects a decline of 0.7% in GDP for this year.
According to prominent economic analysts at the business consulting firm EY, the approaching recession in the United Kingdom might be far more severe than previously anticipated.
The experts at the company have come to the conclusion that the next three years might be worse than they projected only three months ago as a result of less government assistance, more taxes, and an overall worsening outlook.
In October, EY’s ITEM (Independent Treasury Economic Model) Club projected that the country’s gross domestic product (GDP) will decrease by 0.3% this year, then expand by 2.4% the next year, and then increase by 2.3% in 2025.
However, according to a revised projection that was made public on Monday, it is expected that GDP would decrease by 0.7% this year, followed by growth of 1.9% and 2.2% over the next two years.
The downgrading runs counter to newly released economic statistics as well as the general tone that emerged from the World Economic Forum in Davos, both of which indicated that the global picture was not quite as bleak as was initially thought. In recent days, the FTSE 100 has been hovering ominously close to reaching its all-time high.
“The UK’s economic outlook has become gloomier than forecast in the autumn, and the UK may already be in what has been one of the mostly widely anticipated recessions in living memory,” said EY’s UK chair, Hywel Ball.
Ball stated that although the recession could be more severe than initially anticipated, it would not necessarily last for a longer period of time than was highlighted in early estimates.
In spite of this, EY predicted that the United Kingdom will enter a recession this year, with the economy contracting during the first half of 2023 before beginning to expand again during the summer. According to the report, this recession will most likely prove to be less detrimental to the economy than the recessions that occurred in the 1980’s, 1990’s, and 2000’s.
“The one silver lining is that despite being a deeper recession than previously forecast, it won’t necessarily be a longer one,” Ball said. “The economy is still expected to return to growth during the second half of 2023 and has been spared any significant new external shocks in the last three months from energy prices, Covid-19 or geopolitics. Meanwhile, the chief headwind to activity over the last year – high and rising inflation – may be starting to retreat, while energy prices are falling too.”
The average rate of inflation for this year is projected to be 7.2% by the experts, which includes a significant increase that will occur as of April 1 due to the fact that the government’s energy support programme will become £500 less generous for the typical household.
online sources: theguardian.com, ey.com