The Pound (GBP) strengthened on Wednesday morning as a new report from the National Institute of Economic and Social Research (NIESR) lifted hopes that the UK economy may avoid a recession this year.
In its latest economic outlook publication, the NIESR predicts that ‘The UK is likely to avoid a ‘technical recession’ in 2023.’
This is a more upbeat outlook that some other forecasts, such as the recent report from the International Monetary Fund (IMF), which predicted a contraction of 0.6% in UK GDP this year.
However, Sterling’s gains were perhaps limited by other concerns highlighted within the NIESR’s report.
The report goes on to say that, although the UK may avoid a technical recession:
‘with GDP growth set to remain close to zero in 2023 and real personal disposable income having contracted for four consecutive quarters, it will certainly feel like a recession for many.’
The UK still faces serious economic challenges: high inflation, rising interest rates, industrial action, low productivity and a cost-of-living crisis. Any fresh headlines about these issues could once again put pressure on the Pound.