The UK recession will be almost as deep as that of Russia, economists predict

The U.K.'s economic contraction is expected to be as deep as that of Russia in the next few years.

The U.K.'s real GDP is expected to contract by 1.2% over the course of this year, according to Goldman. The lender expects this to be followed by a 0.9% expansion in four years.

Britain is only fractionally ahead of Russia, which the bank projects will see a 1.3% contraction as it continues to wage war in Ukraine and weather sanctions from Western powers. According to Goldman figures, this will be followed by a 1.8% expansion in four years.

The Wall Street giant expects the U.S. to expand by 1% in the next two years. The German economy is expected to contract by 0.6% this year and then grow by 1.4% in the next year.

According to Goldman, the U.K. will contract in 2023 and expand in 2024. The U.K. will lag behind other developed nations in the coming years even though it faces the same macroeconomic challenges, according to theOECD.

Goldman Chief Economist Jan Hatzius and his team concluded that the euro area and the U.K. are both in a recession because of higher household energy bills.

Real income, consumption, and industrial production will be affected by inflation. We expect the euro area's real income to decline by 1.6% in the first quarter of 2020 and 3% in the second quarter of 2020.

The U.K. Office for Budget Responsibility projects that the country's living standards will fall for the first time in recorded history. The OBR forecast that real household disposable income will fall by 4.3% in 2022-23.

The U.K.'s real GDP will contract by 1.3% in 2023, before recovering to a small increase in 2024, according to a projection by the consulting firm.

The squeeze on incomes was the main driver. The Bank of England raised rates by 50 basis points in December as it looked to rein in inflation which was at a 41 year high in November.

The central bank is expected to raise the bank rate to 4% in the first quarter of this year as inflation begins to ease.

According to an outlook report in December, the unemployment rate is expected to reach 5.6% by the year's end, with an increase of 680,000 people.

Yael Selfin said the spike in food and energy prices had already reduced household purchasing power.

Growth has been affected by rising interest rates. According to the report, lower income households are particularly exposed to the mix of current price pressures, as the most affected spending categories largely fall on necessities.

In response to the squeeze on income, households are expected to cut spending on discretionary items. As consumers cut back on spending, we anticipate a sharp reduction in non-essential categories of spend by those households most affected by the rise in energy and food costs.

The U.K. faces unique domestic obstacles such as a long-term sickness crisis that has severely tightened its labor market as a result of the war inUkraine. The country is experiencing a decline in trade due to the decision to leave the EU.

"Although commodities drove the initial headline surge in inflation, price pressures have broadened significantly across core categories in both the euro area and the U.K.

There is a perfect storm of an energy crisis and an overheated labor market in the U.K.