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HomeUncategorizedGoldman Sachs downgrades UK growth outlook, sees deeper recession

Goldman Sachs downgrades UK growth outlook, sees deeper recession

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Liz Truss has finally reversed her flagship plan to freeze corporate income tax, and from next year it will rise from 19 % to the 25 %.

The US investment banking group Goldman Sachs has downgraded the growth outlook for the UK economy after the British Prime Minister, Liz Truss, abandoned her fiscal plan to freeze the scheduled increase in corporate income tax , reports Bloomberg.

“Considering a weaker growth momentum , conditions significantly tighter financial statements and higher corporate tax from next April, we further downgrade our UK growth outlook and now expect a more significant recession“, says the report published this Sunday by Goldman Sachs.

The projection of annual growth of the British economy for 2023 has been reduced from –0.4% to –1%. Meanwhile, the core inflation at the end of next year could be 3.1%, compared to the 3.3% previously forecast .

Liz Truss backs up

This Friday, Truss finally backtracked on his signature plan to freeze the corporation tax, and from 2023 it will rise from 19 % to the 25 %, as planned by the government of his predecessor, Boris Johnson. After former Finance Minister Kwasi Kwarteng announced his ‘mini-budget’ at the end of September with the biggest tax cuts

in decades to fuel the growth of an economy with skyrocketing inflation, the pound sterling fell to record lows against the dollar and there was turmoil in the markets.

Goldman Sachs analysts now expect a less aggressive monetary policy

by the Bank of England. An increase of 75 basis points is expected in the interest rates for November and December, compared to 100 basis points provided earlier. In addition, a 0.5% increase in the interest rate is forecast in February and two other extensions of 19 basis points in March and May, respectively.

The investment banking group also reduced its expectations regarding the total interest rate , which could reach up to 4,75% and not 5% as there was provided above.

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