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Updated February 15th, 2024 at 20:20 IST

After Japan, UK slips into recession

This economic downturn, meeting the technical definition of a recession, adds to the woes of Prime Minister Rishi Sunak.

Reported by: Business Desk
Market Capitalisation of Top-10 Firms decline
UK, Japan in recession | Image:Unasplash
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Recession in the UK and Japan: The two big economic powers are faltering, and the clouds of economic uncertainty have taken over them. Japan plunged into recession owing to subdued domestic demand, and similarly, the UK’s economy also shrank by 0.3 per cent in the three months to December.  The UK’s economy derailed because of high costs of living, and higher interest rates hitting the demand hard.

The economic landscape of the United Kingdom took a severe hit in the latter part of the previous year, thrusting Prime Minister Rishi Sunak into the spotlight for failing to deliver on his promises to steer the economy back on track. 

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The dual challenges of surging inflation and a mounting cost of living crisis played a pivotal role as official figures revealed a 0.3 per cent contraction in the UK's GDP for the fourth quarter of 2023, following a 0.1 per cent dip in the preceding three months.

This economic downturn, meeting the technical definition of a recession, adds to the woes of Prime Minister Sunak, who had assumed office in October 2022, succeeding Liz Truss. 

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Sunak's ambitious commitments outlined in his major speech in January 2023, encompassing tackling inflation, mitigating the cost of living crisis, fostering economic growth, reducing debt, and addressing issues within the National Health Services (NHS), now appear elusive.

The setback comes at a challenging time for Sunak, already grappling with internal dissent within his right-wing party members, and with a general election looming on the horizon by January 2025.

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In a simultaneous global economic shift, Japan witnessed a slip in its economic standing, losing its title as the world's third-largest economy and entering a recession. Official data puts Japan's GDP at $4.2 trillion, trailing behind Germany's $4.5 trillion in 2023. 

The contraction of 0.4 per cent in the December quarter, following a 2.9 per cent decline in the September quarter, paints a challenging economic picture for the Asian economic giant.

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These developments align with predictions that India is poised to surpass Japan in nominal GDP shortly. 

Meanwhile, the United States retains its status as the world's largest economy, boasting a GDP of $27.94 trillion in 2023, followed by China at $17.5 trillion. 

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As the global economic landscape undergoes shifts, the challenges faced by leaders, both in the UK and internationally, in managing economic uncertainties and delivering on promises take center stage.

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Published February 15th, 2024 at 17:11 IST

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