UK Recession Expected to be Nearly as Deep as Russia’s

January 3, 2023

The U.K. economy is expected to see a contraction in 2023 that will be nearly as deep as that of Russia, economists expect, as the nation grapples with surging inflation and a steep drop in household standard of living.

Goldman Sachs is forecasting a 1.2% contraction in GDP in the coming year, well below the lender’s expectations for the other G-10 economies. They anticipate a modest economic expansion of 0.9% in 2024.

The projections put the U.K. only slightly ahead of Russia, which is expected to see an economic contraction of 1.3% in 2023 as the nation’s war in Ukraine drags on and the economy weathers sanctions from the West. This will be followed by a 1.8% expansion in 2024, In Goldman’s estimation.

The U.S. economy is expected to expand 1% in 2023 and 1.6% in 2024. Germany, the next worst performer among major economies after Russia and the U.K., is expected to see a 0.6% contraction this year, followed by a 1.4% expansion next year.

Goldman economists conclude that the U.K. and the eurozone are already in a recession, driven by a “much bigger and more drawn-out increase in household energy bills,” which has driven inflation to higher peaks than in other advanced economies.

The U.K.’s politically independent Office for Budget Responsibility projects that the country is facing the steepest decline in living standards on record. The OBR forecasts that household disposable income, a proxy for living standards, will fall by 4.3% in 2022 and 2023.

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