Budget 2023: UK will not enter recession, OBR forecasts

Britain's Chancellor of the Exchequer Jeremy Hunt holds the budget box as he poses for pictures at Downing Street in London, Britain March 15, 2023. REUTERS/Hannah McKay
Britain's Chancellor of the Exchequer Jeremy Hunt says the UK will not enter recession. Photo: Hannah McKay/Reuters

Jeremy Hunt has announced that the UK is no longer forecast to enter a "technical recession" this year, citing the latest Office for Budget Responsibility's (OBR) projection.

Delivering his Spring Budget statement in the Commons, the UK's chancellor of the Exchequer stated: "Today the Office for Budget Responsibility forecast that because of changing international factors and the measures I take, the UK will not now enter a technical recession this year.

"Despite continuing global instability, the OBR report today that inflation in the UK will fall from 10.7% in the final quarter of last year to 2.9% by the end of 2023."

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According to the chancellor's OBR data, the UK's economic output is still to fall by 0.2% in 2023, but that the the economy will grow each year after that until 2027.

Hunt added that the independent OBR forecast showed that economic output in the UK is set to grow by 1.8% in 2024 and by 2.5% in 2025.

The latest OBR forecast is in contrast with the bleak calculations made in November 2022, which predicted the UK economy would shrink by 1.4% in 2023, and a lower growth rate of 1.3% for 2024.

Hunt added that the OBR forecast, "will meet the prime minister’s priorities to halve inflation, reduce debt and get the economy growing".

Read more: Budget 2023: UK house prices to fall by 10%, OBR predicts

The OBR data is in contrast to last month's IMF forecast for UK economic growth, which predicted Britain's economy would shrink by 0.6% in 2023.

The UK is still the only G7 economy that has yet to recover to pre-pandemic levels of industrial output.

The OBR's document on the UK's fiscal and economic outlook for March stated: "CPI inflation peaked at 11.1% in October and is expected to fall sharply to 2.9% by the end of 2023, a more rapid decline than we expected in November.

"The drop in wholesale gas prices also means that household energy bills are expected to fall below the energy price guarantee limit from July and to £2,200 by the end of the year."

The document added: "Inflation returns to target in early 2028, with the offsetting effects of lower gas prices and increased domestically generated inflation leaving the consumer price level at the end of our forecast little changed from November."

Read more: Budget: Pound soars as Jeremy Hunt says recession threat is over

The Bank of England's Monetary Policy Committee's (MPC) February report stated: "We expect inflation to fall quickly this year.

"The price of energy is not expected to rise so rapidly. The government has introduced a scheme that caps energy bills for households and businesses, and oil and gas prices have fallen a lot recently.

"We don’t expect the price of imported goods to rise so fast as some of the production difficulties that businesses have faced are starting to ease.

"Higher interest rates will help to reduce the demand for goods and services in the economy. And this will help slow the rate of inflation down further."

Prior to his speech, Hunt had already announced that government support for energy bills will continue for three months from April, protecting consumers from an average increase of £500.

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Typical household energy bills were scheduled to rise to £3,000 a year from April, however, the chancellor said: “High energy bills are one of the biggest worries for families, which is why we’re maintaining the energy price guarantee at its current level.

“With energy bills set to fall from July onwards, this temporary change will bridge the gap and ease the pressure on families, while also helping to lower inflation too."

Watch: Watch: Key points from Jeremy Hunt's Spring budget 2023

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