S&P Global Ratings' Bleak Outlook for UK Economy: Stagnation Looms into 2024
S&P Global Ratings presents a somber economic outlook for the UK, predicting sluggish growth and a delayed recovery into 2024, citing persistently high inflation and evolving monetary policies as key factors.
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In its latest UK economic outlook report, S&P Global Ratings has painted a sobering picture of the British economic landscape. The report indicates that the UK's economic growth is expected to remain lackluster, bordering on stagnation, well into 2024. This extended period of slow growth is primarily attributed to the lingering impacts of high inflation and the increasingly restrictive monetary policy rates as inflation gradually subsides.
While there is a glimmer of hope with an upward revision of the growth forecast for 2023, from zero to 0.3%, expectations for 2024 have been downgraded significantly. The forecast for 2024 has been slashed to a mere 0.5% from the previously estimated 0.8%, signaling a delayed and protracted economic recovery.
Despite the persistently high headline inflation, S&P anticipates a gradual decline, with expectations that it will approach the target range by the latter half of 2024. The agency also suggests that the Bank of England (BoE) may have already concluded its current cycle of interest rate hikes, contingent upon a reduction in wage growth in the near future.
The BoE had previously maintained its key policy rate at a 15-year high of 5.25% for nearly two years, marking a pause in its monetary tightening cycle. This decision was influenced by softer-than-expected inflation and labor data.
Notably, the UK's annual consumer inflation has declined for the sixth consecutive month, falling to 6.7% in August. This persistent high inflation remains a central concern for the nation's economic prospects.
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