LONDON - On Wednesday, the British Chambers of Commerce (BCC) predicted that the country's economy will contract less than expected this year, avoiding the two-quarters of negative growth that characterize a technical recession.

The improved outlook coincided with other indicators of the British economy, such as purchasing managers' index (PMI) surveys and consumer confidence data, which have improved in recent weeks.

After stronger activity at the end of 2022, the BCC forecasts that GDP will fall by 0.3% this year, a smaller decline than its previous forecast of a 1.3% fall.

According to official data, the economy narrowly avoided a recession after experiencing zero growth in the fourth quarter of 2022. The January figures are scheduled to be released on Friday.

GDP is expected to fall 0.3% in the first quarter of 2023, before increasing by 0.2% in the second quarter and rising by 0.2% in each of the third and fourth quarters of 2023.

Last month, economists polled by some media predicted that the economy would contract by 0.4% in the first and second quarters, and then decline by 0.1% in the third quarter.

The BCC forecasts 0.6% growth next year, while the Bank of England (BoE) forecast a 1% contraction in 2024 last month.

Despite the upward revision, businesses face a difficult year ahead due to staff shortages, rising taxes, and energy bills, according to Alex Veitch, director of policy at the BCC.

Veitch warned that if Chancellor Jeremy Hunt does not include incentives to help businesses in his annual budget next week, the economy risks falling behind competitors.

"If he supports them, by acting on childcare to alleviate staff shortages and assisting them in managing their energy costs, the UK economy could still thrive," he said.

Britain is the only one of the Group of Seven economies that has yet to recover to pre-pandemic levels, and the BCC predicts that it will not do so until the fourth quarter of 2024.

While consumers and businesses continue to feel the effects of double-digit inflation, the BCC expects it to fall to 5% in the fourth quarter and 1.5% by late 2024.

British inflation fell to 10.1% in January, edging closer to the 11.1% peak reached in October 2022, but it remains more than five times the Bank of England's 2% target.

The BCC anticipates that BoE rates will be a quarter-point higher at the end of the year than they are now, bringing rates to 4.25%, before being cut to 3.5% by late 2024.