According to the organization, approximately 1.2 million families will deplete their savings due to higher mortgage payments in the current financial year. This will bring the total number of households with no spare cash to 7.8 million, which accounts for more than one-quarter of all households.
NIESR predicts that house prices will decline for three consecutive years, while the Bank of England will struggle to control price rises for several years to come.
NIESR also forecasts a meager GDP growth of 0.4% this year and 0.3% next year. As a result, the country is expected to experience five years of economic stagnation, with GDP not reaching its pre-Covid size until the third quarter of next year and significant growth remaining uncertain even beyond that point. The possibility of a recession within this year cannot be dismissed, according to the group.
This warning comes as the global economy faces deterioration. On Tuesday, bond yields declined and shares were sold off due to concerns about the health of the Chinese economy and the US banking system.
China experienced an unexpected sharp decline in both imports and exports in July, raising concerns about the well-being of the world’s second-largest economy.
In addition, Moody’s, the credit ratings agency, downgraded ten small and mid-sized American banks.
As a result of these developments, the FTSE 100 fell by 0.5% and America’s S&P 500 dropped by 1%. The strengthening dollar also caused the pound to decline by 0.4% against the USD (reaching $1.27).
Stephen Millard of NIESR warned about the serious risk of a recession in the US. He stated that due to excessively high interest rates, sustained inflation, and further repercussions from the war in Ukraine, global GDP growth rates will not be as high as they have been in the past two decades. He also cautioned about the long-term structural impact on growth.
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