But Niesr additionally downgraded earlier predictions of 0.6% progress subsequent yr all the way down to 0.3% after strain from higher-than-expected borrowing prices.
As a end result, the assume tank has predicted it is going to be one other yr till UK GDP recovers to the place it was earlier than the coronavirus pandemic struck in early 2020.
It mentioned larger rates of interest, which it expects will peak at 5.5%, will significantly weigh on progress prospects.
Stephen Millard, deputy director for macroeconomic modelling and forecasting at Niesr, mentioned: “The triple supply shocks of Brexit , Covid and the Russian invasion of Ukraine , together with the monetary tightening that has been necessary to bring inflation down, have badly affected the UK economy.
“As a result, we expect stuttering growth over the next two years and GDP to only recover to its 2019 Q4 level in 2024 Q3.
“The need to address the UK’s poor growth performance remains the key challenge facing policy-makers as we approach the next election.”
The report additionally warned that jumps in borrowing prices, persistent inflation, and a projected rise in unemployment will widen inequality throughout society.
Niesr mentioned the poorest households will see a 17% shortfall of their disposable incomes in 2024 in contrast with 5 years earlier, whereas the richest households will solely see a 5% drop.
It comes as meals and vitality worth rises have put poorer Britons below strain.
The recent forecasts have proven a slight enchancment in inflation projections, with Consumer Prices Index inflation set to drop to five.2% by the tip of 2023, narrowly assembly Prime Minister Rishi Sunak’s pledge to halve inflation this yr.
Niesr has predicted that inflation will proceed to ease again however slower than predicted, with inflation attributable to sluggish to three.9% by the tip of 2024 and solely fall to the Bank of England’s 2% goal by 2025.
Wages are anticipated to develop forward of inflation subsequent yr in a lift to many households, the report added.
However, Niesr additionally predicted that unemployment will rise considerably over the subsequent two years.
The unemployment fee – which was most just lately recorded at 4% for the three months to May – is ready to be 4.1% for this yr, rising to 4.7% in 2024 and 5.1% for 2025, in accordance with the forecasts.
Adrian Pabst, deputy director for public coverage at Niesr, mentioned: “The aggregate shocks to the UK economy have widened disparities of income and wealth across the household distribution and between prosperous and poor parts of the country.
“The increasing inequalities facing poorer families are reflected in slower wage growth and fast-rising unsecured debt.
“For some of the poorest in society, coping with low or no real wage growth and persistent inflation has involved new debt to pay for permanently higher housing, energy and food costs.”
