London:Britain slipped into recession last year due to elevated inflation and a cost-of-living crisis, official data showed Thursday, dealing a blow to Prime Minister Rishi Sunak ahead of this year's general election.
Gross domestic product contracted by 0.3 percent in the fourth quarter of 2023, following a 0.1 percent contraction in the prior three months, as reported by the Office for National Statistics (ONS). This places the economy in a recession, defined as two successive quarters of falling GDP.
The ONS noted that all main sectors, especially manufacturing, construction, and wholesale, contributed to the decline in the fourth quarter. However, it highlighted that the economy was broadly flat overall in 2023.
Sunak, trailing Keir Starmer's Labour Party in the upcoming election, has pledged to grow the economy as one of his top priorities. The announcement of the recession coincides with two by-elections where the Conservatives fear losing one-time strongholds in Wellingborough, central England, and Kingswood in the southwest.
Capital Economics analyst Ruth Gregory described the recession as "mild" and suggested that timely indicators indicate it is already nearing an end.
Finance minister Jeremy Hunt attributed the output fall to stubborn inflation and high interest rates but emphasized that the economy is "turning a corner." He mentioned signs of improvement such as forecasted growth, rising wages, lower mortgage rates, and low unemployment.
Confirmation of the recession follows separate official data showing that UK inflation remained at 4.0 percent in January, double the Bank of England's target rate. While this was better than market expectations, inflation continues to pose challenges, extending the cost-of-living crisis.
Hunt acknowledged that tackling elevated inflation remains the government's top goal, emphasizing the significance of lowering inflation for economic growth.
Labour criticized the government's economic stewardship, stating that Sunak's pledge to deliver growth is now "in tatters." Labour's finance spokeswoman, Rachel Reeves, argued that the prime minister can no longer credibly claim success after more than 14 years of economic decline under the Conservatives.
The Bank of England's main interest rate, at a 16-year high of 5.25 percent, aims to bring inflation back to its 2.0-percent target. However, rising interest rates also increase loan costs, exacerbating the nation's cost-of-living crunch.
Despite the challenges, annual UK inflation has decreased since its peak in October 2022, attributed to the global inflation surge following Russia's invasion of Ukraine two years ago.
In conclusion, the article provides a comprehensive overview of the UK's economic situation, incorporating official data, political perspectives, and expert analyses, offering readers a nuanced understanding of the current economic challenges and the government's response._AFP
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