According to Goldman Sachs' 2023 macro outlook, the UK economy is set to undergo a 1.2% contraction in Real GDP over the course of 2023, with the worst economic outlook out of all G-10 nations, being only marginally better than Russia, which is set to undergo a 1.3% contraction in its real GDP. The GS macro outlook also suggests that the UK economy would follow up with a 0.9% expansion in 2024. The consultancy firm KPMG also projected a 1.3% decline in the UK GDP. Goldman's projections for the UK are below the market consensus of a 0.5% contraction in 2033, and a 1.1% expansion in 2024.
This forecast, quite worryingly, puts Britain only marginally ahead of Russia, which continues to wage a war in Ukraine whilst facing punitive sanctions from the western world. the UK seems to be the worst performer amongst all major economies besides Russia, with Germany trailing behind with an expected 0.6% contraction in 2023, followed by a speculated 1.4% expansion in 2024.
Alongside Goldman Sachs, the OECD (Organization for Economic Cooperation and Development) also suggests that the UK will lag significantly behind other developed nations in the coming years despite being in a similar macroeconomic situation as them, putting London closer in performance to Moscow than the rest of the G-7.
Goldman Sachs' Chief Economist Jan Hatzius further stated that the Eurozone and the UK are already in a recession, with drawn-out increases in household energy bills, causing inflation to soar, causing the real income to fall, leading to negative consequences for consumption and industrial production. Real income is forecasted to further decline in the euro area by 1.5% through Q1 of 2023, and 3% in the UK through Q2 of 2023. The UK Office for Budget Responsibility projects the nation to face the sharpest decline in living standards on record, with a forecasted decrease of 4.3% in real household disposable income. Consumption is also not helped by the fact that the Bank of England increased its interest rates by 50 basis points in December 2022. Households are expected to rein in spending on discretionary goods, and non-essential items, further decreasing consumption.
These macroeconomic issues coupled with heavily depleted trade post Brexit and the UK sickness crisis are set to have organizations cast a very negative outlook on the UK economy in the coming years. In my opinion, the deteriorating labor market (unemployment rates are set to rise to 5.6% by 2024) coupled with rising inflation is set to have far reaching implications for the global economy as a whole, with UK consumers consuming very little compared to what one might think they would've consumed after the Covid-19 pandemic.
1 comment:
This was a very interesting article. I had no idea that the UK was performing almost as bad as Russia. Do you think that if they would have stayed in the EU that the effects of Covid and the war in Ukraine would have been less. I think the timing of Brexit mixed with everything else has caused lots of economic hardships for the UK. I would like to see more economic data leading up to the war to see where the UK was positioned.
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