UK National Institute: "Economic Recession in Second Half if Current Oil and Natural Gas Prices Persist"

Rishi Sunak, UK Chancellor of the Exchequer [Photo by Reuters]

[Asia Economy Reporter Park Byung-hee] Bloomberg reported on the 7th (local time) that there is a warning that the UK economy could fall into a recession in the second half of this year due to high energy prices.

The UK National Institute of Economic and Social Research (NIESR) estimated that if oil prices remain above $120 per barrel and natural gas prices continue to be 70% higher, the UK's gross domestic product (GDP) will decrease by 0.2% in the third quarter and 0.1% in the fourth quarter of this year. Typically, a recession is considered when GDP declines for two consecutive quarters.

As of this day, crude oil and natural gas prices meet the conditions that NIESR identified as potential causes of a recession. On this day, Brent crude futures prices surged to as high as $139 per barrel in after-hours trading, and natural gas prices have risen by 79%.

Stephen Millard, director of NIESR, said that the conditions of oil prices above $120 and natural gas prices rising by 70% assume a pessimistic scenario, and since current oil and natural gas prices meet these conditions and if this situation continues, the UK economy will fall into a recession in the second half of the year.

Millard added that even if oil and natural gas prices meet the recession conditions, the risk of recession can be reduced if fiscal and monetary policies are operated with a greater focus on economic stimulus than NIESR's expectations.

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