UK’s economy is expected to shrink in 2023; says Bank of England

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The Bank of England’s latest forecasts indicates that there is a serious risk of the United Kingdom going towards recession as it hikes interest rates in an attempt to tackle inflation.

The latest forecasts indicate that the UK’s Gross Domestic Production could fall by nearly 1 per cent in the final quarter of this year when the energy price cap is raised again, taking inflation to 10 per cent this autumn.

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The next year looks alarmingly weak too. The Bank of England (BoE) has cut its growth forecast for 2023 to show a contraction of 0.25 per cent from a previous estimate of 1.25 per cent growth, according to the reports.

It cut its growth projection for 2024 to just 0.25 per cent, from a previous forecast of 1 per cent.

The Bank of England warned that the surge in energy and goods price would have a material impact on disposable income, with inflation taking an even bigger bite.

United Kingdom’s Gross Domestic Production growth was expected to slow sharply over the first half of the forecast period. That predominantly reflected the significant adverse impact of the sharp rise in global energy and tradable goods prices on most United Kingdom households’ real incomes and many United Kingdom companies’ profit margins.

The report said that the four-quarter consumption growth is expected to slow materially over the first half of the forecast period.

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