UK economy faces stagnation, S&P rating agency warns

By Aysu Bicer

LONDON (AA) - S&P Global Ratings painted a sobering picture of British economic trajectory Tuesday in its latest UK economic outlook report.

It suggested that economic growth in the UK will continue to be lackluster, bordering on stagnation, well into 2024 which is primarily attributed to the lingering effects of high inflation and increasingly restrictive monetary policy rates as inflation gradually subsides.

While the report offers a glimmer of hope by revising the growth forecast for 2023 upward to 0.3% from zero, it downgrades expectations for 2024.

The forecast for 2024 has been slashed to 0.5% from the previously estimated 0.8%, signaling a delayed economic recovery.

Although headline inflation remains elevated, S&P expects it to gradually recede and approach the target range by the latter half of 2024.

The agency said the Bank of England (BoE) may have raised interest rates for the last time in the current cycle, provided that wage growth eases in the near future.

The BoE previously kept its key policy rate steady, pausing its monetary tightening cycle for nearly two years, with the policy interest rate held constant at a 15-year high of 5.25%, following softer than expected inflation and labor data.

The UK's annual consumer inflation dropped for the sixth consecutive month to 6.7% in August.