The Office for National Statistics will announce on Friday the UK GDP. The monthly real gross domestic product (GDP) is expected to decline by 0.3% and to expand by 0.40% year over year.
Gross domestic product (GDP) measures the final market value of all goods and services produced within a country. It is the most frequently used indicator of economic activity. The GDP by expenditure approach measures total final expenditures (at purchasers' prices), including fewer exports. This concept is adjusted for inflation.
According to the central bank, the economy is already in recession and will struggle for growth even after the downturn ends. Pre-pandemic output levels will not be restored until 2026, and even a modest expansion of more than 0.7% per year would risk a resurgence of inflation. According to the bank, the UK is already in a recession and will contract by nearly 1% over the next five quarters. The bigger surprise was the downgrade to potential growth the economy’s speed limit above which activity simply generates excess inflation.
The BOE estimates that by 2025 the UK will be able to grow only 0.7% a year — less than half the 1.7% pace prevailing in the decade before Covid-19 struck. It’s also far lower than the 2.7% level before the 2008 financial crisis. Deputy Governor Dave Ramsden described the outlook as “so unusually weak.”
The National Institute of Economic and Social Research said the UK will avoid a contraction this year in stark contrast to gloomier Bank of England and International Monetary Fund projections.
NIESR predicted anemic growth of 0.2% this year before GDP rises 1% in 2024 and 1.6% in 2025. While the UK will escape a contraction in any quarter in 2023, NIESR warned it “will certainly feel like a recession” for millions of households.
Sunak has promised to cut inflation in half and restart the economy before the election, which must be held by 2025. However, the BOE forecasts little growth before then, resulting in 500,000 more unemployed.
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