On what basis did the Minister state in the Wales Budget 2023–2024 leaflet in December 2022 that the UK economy is in recession, and does the Minister stand by that statement?
The Wales Budget 2023–2024 leaflet in December 2022 stated that the UK economy was in recession. This was based on the latest official data at the time which showed that the UK economy had contracted by 0.2% in the third quarter of 2022. This detail was outlined in the financial and economic context of our 2023-24 Draft Budget narrative and the Chief Economists Report:
Welsh Government Draft Budget 2023 to 2024
As a recession is commonly referred to as two consecutive quarters of declining growth, the latest official forecasts were then used to provide an indication of growth for the fourth quarter of 2022, and therefore whether the UK economy would enter into recession over the period. The forecasts at the time by both the Office of Budget Responsibility and the Bank of England estimated output to again fall in that fourth quarter, which was the period in which the statement was written. Therefore at the time, based on these forecasts, it was reasonable to state that the UK economy was expected to enter into recession at the end of 2022.
Since then, the data for GDP has been revised for the third quarter and the estimate for the fourth quarter released. These show that growth in the third quarter of 2022 contracted by 0.1% but that for the fourth quarter of 2022 it then grew by 0.1%. Therefore whilst this suggests that the UK economy did not enter recession over that period, growth was still very low by historic standards and over the whole six month period the UK economy exhibited zero growth. The inferences and implications which followed in the 2023-24 Budget leaflet still remain reasonable. Since the end of 2022, UK growth has continued to be very subdued, presenting highly challenging conditions for the households, businesses and public finances in Wales and across the rest of the UK.