“A Tough Road Ahead of Us”
Great Britain is in a recession
11/11/2022 10:33 am
Great Britain is not only in a political crisis, but also an economic one. Inflation recently exceeded ten percent. Thus the coming recession cannot be avoided. Treasury Secretary Hunt prepares Britons for tough few months ahead
The British economy is on the brink of recession after a weak summer. Gross domestic product (GDP) in July to September was 0.2 percent weaker than in the previous quarter, the Office for Statistics in London said. Economists polled by Reuters had expected an even 0.5 percent decline. If there are two negative quarters in a row, there is talk of a recession.
The Bank of England recently warned of the risk of a two-year recession. The government is preparing Britons for tough months ahead. “I’m under no illusion that we have a tough road ahead,” Treasury Secretary Jeremy Hunt said on the GDP figures. “But to achieve long-term, sustainable growth, inflation must be brought under control.” There is no other way. The rate of inflation has recently been over ten percent, which is squeezing the purchasing power of consumers.
The Bank of England braced itself against rising inflation with its biggest rate hike in decades: It increased the key monetary policy rate by 0.75 basis points to 3.0 percent. It was the biggest hike by the Bank of England (BoE) since 1989 – and it was in the middle of a recession. “If we don’t act now, it will get worse later,” BoE boss Andrew Bailey said, defending the decision. Higher interest rates make borrowing for investment and consumption more expensive, which slows the economy. The economic trend has clearly pointed downward recently. In September alone, Queen Elizabeth’s funeral was once marked as a public holiday, when many businesses closed, and the British economy shrank by 0.6 percent.
The weak economic outlook provides a difficult backdrop to Treasury Secretary Hunt’s budget statement next week. In response to the data, he reiterated his warnings against tougher tax and spending decisions to restore the government’s credibility on Britain’s public finances and economic policy.
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