UK narrowly avoids recession after economy flatlined
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The British pound has continued a charge against the euro and the dollar despite the bleak output for the UK economy. As reported by Pound Sterling Live, a website that tracks the performance of the British currency, the pound has enjoyed a recovery in recent days.
The pound-to-euro exchange rate recovered to 1.1287 while the pound-to-dollar exchange rate moved up by 0,42 percent to 1.2105.
Valentin Marinov, Head of G10 FX Strategy at Crédit Agricole explained what this means for the UK economy in comparison to other countries.
He said: “The GBP managed to outperform the EUR and was generally better able to hold its ground vs the resurgent USD so far this week.
“We think that the recent moves in EUR/GBP reflect the correction of the significant overvaluation of the cross relative to its short-term fair value.”
While this comes as good news for the UK economy, experts are warning that Britain still faces a tough road ahead.
The Office for National Statistics announced today that the UK economy flatlined in the fourth quarter of 2022 with growth of 0 percent.
This meant that the UK narrowly avoided a recession, but the economy contracted by 0.5 percent in December.
Chancellor Jeremy Hunt said himself on Friday that the UK is “not out of the woods” as the Government aims to tackle inflation.
He said: “The fact the UK was the fastest growing economy in the G7 last year, as well as avoiding a recession, shows our economy is more resilient than many feared.
“However, we are not out the woods yet, particularly when it comes to inflation.”
Last month, it was confirmed that the UK was the only G7 economy forecast to shrink in 2023.
High interest rates in the UK and rampant inflation meant other major economies looked set to jump ahead of Britain.
Pierre-Olivier Gourinchas, the International Monetary Fund’s economic counsellor, said 2023 would be “quite challenging” for the UK.
However, earlier this week, a think tank predicted that the UK will fend off recession in 2023.
The National Institute of Economic and Social Research (Niesr) warned that it will still “feel like a recession” due to high energy prices and the wider cost of living crisis.
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Professor Leaza McSorley, Niesr’s senior research manager, said: “The UK economy performed better than forecast in 2022, with annual GDP growth of 4.1 percent and unemployment at 3.7 percent.
“So, while the economy seems unlikely to fall into a protracted contraction, the risks are skewed on the downside with higher Bank rate and some withdrawal of fiscal support likely to bear down on activity over the course of 2023 and 2024.”
Labour’s Shadow Chancellor, Rachel Reeves, has criticised the Government after the UK economy didn’t grow in the last quarter of 2022.
On Twitter, she said: “GDP figures show growth at 0.0 percent.
“Despite Britain’s great potential, our economy is stuck in the slow lane and working people are paying the price.
“The government must get a grip of the cost of living crisis and urgently bring forward a proper plan for growth.”
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