By Business AM
The Office for Budget Responsibility (OBR), a fiscal watchdog in the United Kingdom (UK), has brought down its 2023 growth expectation for Britain’s economy and says it is already facing recession on the back of widespread inflation.
The economy will shrink by 1.4 percent in 2023, OBR said, adding that it the gross domestic product (GDP) of the UK to drop in the face of its significant downgrade of previous projections that the economy would actually grow by 1.8 percent next year.
For 2022, however, OBR slightly raised projected total economic growth to 4.2 percent from 3.8 percent contained in the statement it issued in March.
It has also projected an inflation level of 9.1 percent on the average and 7.4 percent for 2023.
The UK finance chief, Chancellor Jeremy Hunt, in his statement for autum, said the forecasts “confirm that our actions today help inflation to fall sharply from the middle of next year”.
“They also judge that the UK, like other countries, is now in recession,” he added.
Hunt said in his statement that plans to reduce new spending and the tax plans that are being put in place are aimed at securing an extra £55 billion to help address the UK’s fiscal hole.
The UK fiscal hole represents extra money needed by the country’s government to enable it meet self-imposed targets aimed at bringing down the size of state debt relative to national income.
The statement is coming in the wake of inflation rocketing to a 41-year-high at 11.1 percent in October on the back of surging energy and food costs.
The latest forecasts by the OBR had been long awaited after the official forecasting body was not used during the September mini-budget, led by former chancellor Kwasi Kwarteng.
But some economists have partially linked the shock to the pound and bond yields following the September mini-budget release to a lack of visibility on the impact of the previous government’s fiscal plan.