Uk may be entering full blown recession budget watchdog

The UK's Office for Budget Responsibility (OBR) has warned that the country may be entering a full-blown recession, with the economy shrinking by 0.3% in the first quarter of 2023.

The OBR's latest forecast, published on March 16, 2023, suggests that the UK's economy is facing a significant slowdown, driven by a combination of factors including:

  1. Global economic uncertainty: The ongoing war in Ukraine, rising inflation, and supply chain disruptions are all contributing to a more uncertain global economic outlook.
  2. Brexit: The UK's departure from the EU has led to a decline in trade and investment, which is expected to continue in the short term.
  3. Fiscal policy: The UK government's decision to reduce public spending and increase taxes is expected to dampen economic growth.
  4. Monetary policy: The Bank of England's decision to raise interest rates to combat inflation is also expected to slow down the economy.

The OBR's forecast suggests that the UK's economy will grow by just 0.2% in 2023, down from its previous forecast of 1.3%. This would be the slowest rate of growth since the financial crisis.

The OBR also warned that the UK's public finances are under pressure, with a growing budget deficit and rising debt. The government's debt is expected to reach 97% of GDP by 2025, up from 85% in 2020.

The OBR's warning has sparked concerns about the impact on the UK's economy and the potential for a full-blown recession. A recession is typically defined as two consecutive quarters of negative economic growth.

The UK's Chancellor of the Exchequer, Jeremy Hunt, has acknowledged the OBR's warning and has promised to take action to support the economy. However, the exact measures have not been announced yet.

The OBR's forecast has also sparked concerns about the impact on households and businesses. Rising interest rates and inflation are expected to increase the cost of living and borrowing, which could lead to a decline in consumer spending and investment.

Overall, the OBR's warning highlights the challenges facing the UK's economy and the need for policymakers to take action to support growth and stability.