London – The British economy grew slowly at the beginning of this year, better than the shallow recession that was previously expected, but an unexpected sharp decline in production during last March highlighted the fragility of the British economy’s recovery.
Gross domestic product rose in the first quarter of 2023, in line with economists’ expectations, as a preliminary estimate published Friday by the National Statistical Office showed, after rising by only 0.1 percent compared to the fourth quarter of last year.
The economy contracted at the end of the first quarter by 0.3 percent in March, after it was flat in February, while it rose by 0.5 percent in January.
Darren Morgan, director of economic statistics at the institute, said on Twitter that growth in the first quarter “was driven by the informatics and construction sectors,” but that “the economy slowed due to wage strikes in the health, education and public administration sectors.”
He added that in March the economy witnessed a “generalized decline in the services sector” and a decline in car sales as well, and the month was “difficult for the storage, distribution and retail sectors.”
And after Britain was among the fastest growing economies of the seven industrialized countries in 2022, but it is currently, along with Germany, one of only two countries in a group of countries expected to witness a contraction this year.
Yael Selvin, an economist at KPMG, commented on the results, telling AFP, “A weaker economy in March confirms its fragility, despite lower energy prices, improved supply chains and consumer confidence.”
And because of inflation, which still exceeds 10 percent, it was expected until recently that the sixth largest economy in the world would witness a contraction this year, after it narrowly avoided this at the end of 2022.
But analysts believe that the latest forecasts, including those published by the Bank of England last Thursday, are more optimistic.
To combat inflation, the Central Bank raised interest rates for the twelfth time in a row to 4.5 percent, bringing it to the highest level since the global financial crisis in October 2008, considering that the British economy is in a stronger position than expected.-
And now the Bank of England expects GDP growth of 0.25 percent in 2023 without recording a contraction in any quarter this year.-
“If a recession is likely to be ruled out, vulnerabilities arising from higher borrowing costs and tightening credit are expected to affect business and household activity,” Selvin said.
However, it expected business investment and consumption expenditures to remain moderate in the short term.
In a statement Friday, Chancellor of the Exchequer Jeremy Hunt welcomed the “good news” about growth in the first quarter, but for it to reach its targets the government will have to focus on “competitive” tax policy and tackle labor and productivity issues that are holding back the economy.
Inflation slowed slightly last March to 10.1 percent, but it is still driven by food prices, and Britain is the only country in the Group of Seven where this rate exceeds ten percent.
According to the Bank of England, it is expected to start declining quickly as soon as the April data is published. The rise in prices, which causes a severe living crisis, is also behind employee strikes in many sectors for about a year, which contributes to the slowdown in the economy.
Martin Beck, an expert at the global consulting firm Ernst & Young, said that “the continuous strikes and the additional day off in May” on the occasion of the coronation of King Charles III, “will affect the activity of the second quarter to the extent that a slight decline is expected.”
However, “this matter will only be a temporary setback,” he added, expecting that “the recovery will accelerate in the second quarter of 2023,” with the expected end of social movements, budget easing, and a decline in inflation, which “will contribute to restoring household purchasing power.”
Overall growth in the British economy, which is struggling to return to its pre-pandemic level, was still in the first quarter at half a percentage point, below its level in the fourth quarter of 2019.