The British economy is expected to fall into recession by the end of 2022, which may extend to 2024, Goldman Sachs warns.
In their research, the bank’s economists found that the United Kingdom would probably dip into recession by the end of 2022.
Britain’s gross domestic product is expected to drop by nearly 1% in the first half of 2023. The annual economic production is expected to contract by 0.6% in 2030.
This is a rather unexpected change from the earlier estimates of 1.1% expansion.
Sven Jari Stehn, who leads the economists at the bank, informed that the living costs pressures have increased in the UK as a result of the deepening energy crisis. He expects that the real consumption will mark a significant decline.
The current base case of the bank predicts the recession to be comparatively mild regarding the fiscal support, superfluous savings and strong labor market dynamics.
Last month, UK’s inflation surpassed the 9.8% forecast. This indicates that the British economy must prepare for a tough year end.
Citigroup expects inflation to hit 18.6% at the beginning of next year. The rising energy costs and the worsened living costs will take the toll on consumer spending.
Ofgem has recently indicated that the British household energy bills may reach £3,549 from October. The current price cap will result in an increase of 80%. This means that the households will have to add almost £2,300 on their annual energy bills compared to last year in October.
The Bank of England has already warned that the recession may extend when savings rates reach 1.75%.
Contrary to this, the BBC predicted that the British economy will grow next year, although at a very low pace of 0.2%, which may show a slight increase to 1% in 2024.
