When will the recession end? Experts predict the impact | City & Business | Finance
The UK, already caught in a record slump in the cost of living, is linked with a recession that will reduce Britain’s remaining spending potential. The Bank of England forecasts an economic contraction from the fourth quarter of 2022, between September and December this year. The prediction will have alarmed many Britons, who only emerged from their last recessionary pressures a decade ago.
When will the recession end?
The Bank of England said it expects the recession to last for the next five quarters.
The prediction means that, at most, it would last up to 20 months.
Although it concerns millions of people, the coming financial difficulties will not be as destructive as its predecessors, experts believe.
READ MORE: Andrew Neil delivers damning verdict on struggling UK economy
Thomas Pugh, an economist at leading audit, tax and advisory firm RSM UK, said there was “good news” ahead of the recession.
He told Express.co.uk: “We expect GDP to rebound in the third quarter as the negative impact of the additional bank holiday in June dissipates. However, this is likely to be the last good news before a time.
“The huge increase in energy bills in the fourth quarter is likely to tip the economy into a recession that will last about a year and lead to a peak-to-trough drop in GDP of about 1% to 2%.
“The big picture is that the economy could not be bigger in 2025 than it was in 2019, before the pandemic.”
“The fact that there were two fewer working days in June due to the Jubilee meant that GDP was still likely to fall.
“So the 0.6% m/m drop in GDP in June was actually a bit steeper than the 1% drop we had forecast.
“Furthermore, most of the decline was due to lower healthcare output, the real economy held up better. Indeed, consumer services output remained flat in June 2022.
“Given that the real economy appears to be holding up reasonably well, another interest rate hike in September seems likely.”
DO NOT MISS
“We expect interest rates to reach 2.25% by the end of the year and peak at around 2.75% by mid-2023 before the recession forces the Bank to suspend its tightening cycle.”
Mr Pugh explained that the recession is likely to last until 2025 and have a similar impact to its predecessor in the early 1990s.
He added: “Not all recessions are created equal. The Bank of England has forecast the recession to start in the fourth quarter and last until 2023 with GDP falling around 2% from peak to hollow.
“That would put it on par with the recession of the early 1990s, significantly weaker than the global financial crisis, which saw a peak-to-peak GDP decline of around 6% and a fraction of the pandemic when GDP fell by 22%!”
When the country finally emerges from recession, the Bank of England estimates that economic growth will slowly rebound and initially be “stagnant to low”.
The UK is not alone in expecting a recession this year, as other countries grapple with the possibility.
Recession fears also gripped the United States and the euro zone, where inflation reached 8.5% and 8.9% respectively.
While the UK leads the inflation rankings, France and Germany are catching up, with rates of 6.1 and 7.5% each.