The world’s leading economies continue to face steep challenges,with countries that account for about one-third of global gross domestic product poised to contract this year or next,shaped by the Russian invasion of Ukraine and a cost-of-living crisis caused by persistent and broadening inflation pressures,and the slowdown in China.
Bank of England governor Andrew Bailey said the UK economy likely entereda recession in the three months through September,when output fell an estimated 0.5 per cent. He warned it would last until mid-2024 with inflation,as measured by the consumer prices index,expected to peak at 11 per cent this winter before falling next year.
Unemployment would rise steadily to 6.4 per cent by late 2025,nearly doubling from a current 3.5 per cent,its lowest rate since the mid-1970s,the bank warned.
Bailey said the bank had no other option to implement an eighth consecutive hike in the base rate because inflation was too high.
“It is a tough road ahead,” he told reporters. “The sharp rise in energy prices has made us poorer as a nation... If we do not act forcefully now it will be worse later on.”
The pound fell sharply and was down about 2 per cent against the US dollar,touching its lowest since mid-October when Britain was in apolitical crisis triggered by former prime minister Liz Truss’ tax-cutting plans.
Officials forecast it will be the longest recession since the World War I but not be as deep as the downturn that followed the financial crisis of 2008. The recession is expected to knock 2.9 per cent off the size of the economy,which is less than half of the 6.3 per cent decline in output that followed the GFC.