U.K. Economy Expected to Avoid Recession, Government Says

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LONDON—The U.K. government, seeing an improved outlook for its economy this year, on Wednesday said it would keep subsidizing households facing higher energy bills, boost military spending and provide financial support to encourage older Britons and new parents to return to work.The government’s budget watchdog said it now expects the economy to shrink by a modest 0.2% this year compared with a previous estimate of a decline of 1.4%.

It will also likely avoid a technical recession, which is defined as two consecutive quarters of decline. Inflation is now forecast to fall to 2.9% by the end of the year, down from around 10% currently, according to estimates from the independent Office for Budget Responsibility.

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