The UK avoided a technical recession in 2022 and will avoid another one in 2023, according to the Office for Budget (OBR).

Lower-than-expected wholesale energy prices and falling interest rates leave an improved outlook for the economy in 2023, the Government watchdog said.

The economy will contract by 0.2% - rather than 1.4% as per previous OBR estimates- but will avoid a technical recession defined as negative growth in two successive quarters.

GDP growth then picks up to 1.8% in 2024 and 2.5% in 2025 "as interest rates start to fall and drop in energy and other tradable goods prices take inflation below the [Bank of England's] target".

Inflation peaked at 11.1% in October, according to the OBR, and will fall to zero by 2026 and return to the 2% target by 2028.

The forecaster added that it expects the unemployment rate to "rise modestly" as growth weakens to a peak of 4.4% (1.5 million people), which is nevertheless lower than the peak of 4.9% previously forecast due to "the improved outlook for real GDP in the near term".

Torsten Bell, chief executive of the Resolution Foundation, tweeted:

"No technical recession forecast in 2023, which is quite a thing given how big the energy price shock is. Obviously, it's also not what good looks like".

The Institute of Directors said it was: "encouraged that the supply-side policies announced in the Budget were of sufficient magnitude to themselves cause the OBR to raise forecasts for output and employment in the medium term".

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