The Bank of England has changed its mind about the prospects for the UK economy. Having been predicting a recession in 2023 as recently as February, its latest May report is expecting a soft landing from the bout of high inflation and a year of interest rate hikes.
One reason is that global demand for goods and services is expected to be higher. The central bank now expects weak GDP growth of 0.25% in 2023 compared to a predicted 0.5% contraction in the previous report, and thinks growth will be 0.75% in both 2024 and 2025. It said:
Growth over much of the forecast period will be materially stronger than in the February report. This reflects stronger global growth, lower energy prices, the fiscal support in the spring budget, and the possibility of lower precautionary saving by households than previously assumed in turn related to a lower risk of job loss …
