UK: NIESR cuts 2023 growth outlook and alerts on living standards

Britain will dodge recession this year, but its citizens will face the aftermath of a severe drop in living standards. caused by the rise in inflation, that will leave millions of people struggling to pay their billsacademic researchers predicted Wednesday according to Reuters.

“The British National Institute for Economic and Social Research (NIESR) cut its forecast for gross domestic product growth for this year to 0.2% from 0.7% in its last forecast in Novemberand sees growth of 1.0% in 2024, down from 1.7%,” Reuters reported.

The news also quotes the director of the NIESR, Jagjit Chadha, who stated that the forecasts presented “an incredibly depressing outlook“particularly for the standard of living, which will stagnate this year after last year’s sharp drop due to rising energy prices.

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One in four British households will be unable to pay for food and energy without drawing on their savingsborrow or apply for other types of aid in the 2023/24 financial year, compared to one in five in the current year.

In general, most Britons they have to accept that their income has fallen in real terms and that they will not be able to easily recoup them with a wage increase, Chadha said, echoing a message from the Bank of England last week, when it raised interest rates to 4%, the highest level in 14 years, to deal with a inflation that remains above 10%.

The poorest 10% of Britons have suffered a small drop in their income – thanks to increases in social benefits in line with inflation – but middle-income households face a drop in real income of up to 13% or £4,000 ($4,800) during the year to the end of March 2023.

The NIESR’s growth forecasts are somewhat more optimistic than those of the Bank of England and the International Monetary Fund (IMF), which last week predicted that the British economy would contract in 2023.