How can the UK economy recover from doom and recession?
The UK economy has recovered from recession before and it can do it again. From research, output of the UK economy is expected to reduce but not as much as was feared by the Bank of England a year ago. The “OBR’’ expects the economy to increase briefly in the short term and can expect a slower increase in the medium run. This could be between the next 4-6 years. To begin with, experts say the UK economy is expected to grow by 0.4% in the first quarter of 2023, and to make it worse the wage increases are expected to ease slower which would reduce living standards by 5.7% by the end of the financial year. This is the largest 2-year fall since 1956-1957. These are concerning numbers as experts are questioning how exactly the UK economy can recover from this. Experts have also added that headline inflation is set to fall from 10.9% to 2.1%.
There are many suggestions that the government has made that can tackle this current recession that the UK is facing. One way was to have a 3-month extension of energy price guarantee which would cap annual bills at 2500 pounds to the treasury of 3 billion. This would not only be an advantage to lower-income households- holds but it would also reduce headline inflation which is seen as a huge problem in the current economy. With inflation expected to fall by 2.9% by the end of this year, inflation is predicted to be zero in the middle of the decade (2025). By early 2028 Bank of England inflation is set to rise back by 2%. OBR advisor, David Miles said their forecasts were looking much more positive than the one of Bank Of England. Bank of England’s assessments showed that there was a projection in immigration and there was a reduction in household savings as people have had to spend due to the economic climate. All of this increased growth is in the short term.
A steep decline in domestic spending as a result of rising energy prices, declining real wages, frozen income tax allowances, and higher mortgage payments is a major factor in the economic contraction of 2023. Trades are projected to reduce as a result of the dismal prognosis for the global economy, but this decline will be outpaced by a more significant drop in imports.
Citation- https://www.theguardian.com/uk-news/2023/mar/15/uk-economy-recover-obr-jeremy-hunt
