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The United Kingdom has entered a technical recession as the economy shrank in the last two quarters of the previous year.

The Office for National Statistics (ONS) reported that the nation’s Gross Domestic Product (GDP) decreased by 0.3 percent in the final quarter of 2023, following a 0.1 percent decline in the third quarter. This marks the first instance of back-to-back quarterly GDP contractions since the early months of 2021, signaling a downturn in economic activity.

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Following the release of the GDP figures, the British pound experienced a moderate depreciation against major currencies, including the United States dollar and the euro. The ONS highlighted that the contraction in the fourth quarter was more severe than anticipated, with previous forecasts suggesting a milder shrinkage of 0.1 percent. Additionally, economic output in December fell by 0.1 percent, contrary to predictions of a 0.2 percent decrease, after witnessing a growth of 0.2 percent in November.

The economic stagnation extends back nearly two years, with forecasts from the Bank of England suggesting a slight improvement in 2024. However, this slow growth poses challenges for Prime Minister Rishi Sunak as he seeks to gain favor with voters in anticipation of the upcoming national election.

Finance Minister Jeremy Hunt remains optimistic, citing “signs the British economy is turning a corner” and emphasizing the importance of adhering to the current fiscal strategy, including tax reductions to strengthen the economy. Meanwhile, critiques of the government’s approach, like Pranesh Narayanan from the Institute for Public Policy Research, argue that the current state of the economy reflects inadequacies in public investment and calls for a shift in priorities towards bolstering public services and infrastructure rather than implementing tax cuts.


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