Finance Minister Jeremy Hunt said that the U.K. economy would no longer enter a technical recession in 2023, as was previously anticipated.
The updated outlook was based on new forecasts from the independent Office for Budget Responsibility (OBR), Hunt said.
A technical recession is a term used to describe a situation where an economy experiences two consecutive quarters of negative economic growth, as measured by the country’s gross domestic product (GDP). In other words, a technical recession occurs when an economy experiences a decline in economic activity for six months in a row.
During a technical recession, businesses and consumers may reduce their spending, resulting in a decline in demand for goods and services. This can lead to job losses and a rise in unemployment rates, as companies may need to cut costs and lay off workers to stay afloat.
Governments and central banks may take various measures to try to mitigate the effects of a technical recession, such as implementing fiscal policies to stimulate spending or reducing interest rates to encourage borrowing and investment.
The Chancellor of the Exchequer said that the U.K. economy was “proving the doubters wrong,” following earlier predictions, including from the Bank of England, that the country was facing its longest-ever recession.
In its revised outlook, the OBR said it now predicts that the economy will contract by 0.2% this year, before growing by 1.8% in 2024 and 2.5% in 2025. During the Autumn Statement last November, the OBR had said that the economy would shrink by 1.4% in 2023, according to CNBC.
The OBR also on Wednesday said that it expects inflation to fall to 2.9% by the end of 2023, meaning that the pace of price rises would be slower than previously anticipated.
The rate of inflation currently stands at 10.1%, having fallen from a high of 11.1% in October. However, it still stands well above the target level of 2%.
“They forecast we will meet the prime minister’s priorities to halve inflation, reduce debt and get the economy growing,” Hunt said of the OBR in his speech to the House of Commons.