Jeremy Hunt announced in his Budget that the UK has avoided recession and that inflation would drop to 2.9 percent. However, experts are warning that concerns over the lack of positive Gross Domestic Product (GDP) growth mean that the economy is far from thriving.
Yesterday, Mr Hunt said the UK had “provided the doubters wrong” by avoiding an economic downturn.
A recession is recognised as having taken place when a nation experiences two consecutive quarters of negative growth.
Based on this definition, the UK narrowly avoided a recession last year due to reporting no growth in the last quarter of 2022.
Despite this, experts are sounding the alarm that this perceived relief comes amid the backdrop of a global financial system “teetering” on the edge of a potential catastrophe.
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This comes after the fallout of the Silicon Valley Bank collapse and fears over Credit Suisse weighing on share prices.
Currently, the UK is the only country which has not fully recovered from its lost output in the G7 after the pandemic.
In light of this, analysts are not ruling out a potential recession in the near future as the economy continues to stagnate and stumble.
Marcus Brookes, chief investment officer at Quilter Investors, highlighted how many Britons already “feel” the country is in recession.
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He explained: “Indeed, the Chancellor was keen to stress that the UK is back on the track to growth following a difficult 2022 and start to 2023.
“The Chancellor may have said that the UK won’t enter a technical recession this year, but for many this will have felt like one, and it is hard to get away from the fact that growth has stagnated.
“Jeremy Hunt’s positivity is perhaps slightly premature, particularly given the backdrop, but it can be said that with energy prices where they are and inflation beginning to fall back, we are in a better position now than we perhaps were six months ago.”
The finance expert broke down the struggle the country’s economy will face in order to get back on track.
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Mr Brookes added: “The forecasts from the Office for Budget Responsibility highlights the difficult path the UK faces.
“It still expects the economy to contract this year, and the level of debt is still at extremely elevated levels.
“Given that inflation in the US is proving stickier than first feared, its forecast that inflation will fall to 2.9 percent is ambitious and goes well beyond the Government’s plan to half it this year.
“It is hard to get away from the fact that currently growth is stagnating and while some of today’s announcements will help, that growth cannot be conjured up quickly.
“Mixed together with the current macroeconomic backdrop and slowing growth globally, the UK will do well to hit those OBR targets.”
Inflation has been an ongoing issue for households for over a year, with the latest Consumer Price Index (CPI) rate sitting at 10.1 percent.
This is the third month in a row that inflation has dropped, however, it is still a high rate for consumers to deal with.
The Office for National Statistics (ONS) is set to announce February’s rate on March 23, 2023.
