United Kingdom economy to shrink in 2023, warns Bank of England

London: The Bank of England’s latest forecasts show that there is a serious risk of the UK falling into recession, as it hikes interest rates in an attempt to tackle inflation, The Guardian reported.

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

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, The Guardian reported.

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

The BoE warned that the surge in energy and goods price will have a material impact on disposable income, with inflation taking an even bigger bite.:

UK’s GDP 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 UK households’ real incomes and many UK companies’ profit margins.

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

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