Following a forecast 0.3% decline in GDP in Q3, the UK economy is expected to contract around 0.2% each quarter from Q4 this year through to Q2 2023, resulting in GDP falling 0.3% in 2023 as a whole. This is a significant revision from the 1% growth forecast for 2023 in the EY ITEM Club’s July Summer Forecast – although the scale of the upcoming downturn is expected to be shallow relative to previous recessions thanks, in part, to the Government’s intervention on household and business energy bills.
As the squeeze on real incomes from high inflation eases, tax cuts take effect, the cheap pound boosts net exports and the tightening cycle for interest rates ends, GDP should return to growth in the second half of 2023. The economy is then expected to expand 2.4% in 2024 (unchanged from the Summer Forecast) and 2.3% in 2025.
Meanwhile, the EY ITEM Club’s growth forecast for 2022 has been upgraded to 4.3% (from 3.7%) after historical data revisions by the Office for National Statistics.
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