UK expected to be only major economy to shrink in 2023 – IMF
UK expected to be only major economy to shrink in 2023 – IMF
The UK economy will shrink and perform worse than other advanced economies, including Russia, as the cost of living continues to hit households, the International Monetary Fund has said.
The IMF said the economy will contract by 0.6% in 2023, rather than grow slightly as previously predicted.
However, the IMF also said that it thinks the UK is now “on the right track”.
Chancellor Jeremy Hunt said the UK outperformed many forecasts last year.
But shadow chancellor Rachel Reeves said the figures showed the UK “lagging behind our peers”.
The IMF, which works to stabilise economic growth, said it had downgraded its forecast for the UK because of its high energy prices, rising mortgage costs and increased taxes, as well as persistent worker shortages. It did not mention Brexit in its report as a factor for the UK not performing as well as others. Today marks three years since the UK left the EU.
The UK is expected be the only country to shrink next year across all the advanced and emerging economies. Even sanctions-hit Russia is now forecast to grow this year.
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If a country’s economy shrinks, typically this means companies make less money and the number of people unemployed rises.
IMF chief economist Pierre-Olivier Gourinchas told the BBC that last year, the UK had “one of the strongest growth numbers in Europe”.
But he said this year’s forecast reflected its “high dependence” on expensive liquid natural gas, which had driven up the cost of living.
Mr Gourinchas said the government plans since November when it set out its spending plans in the Autumn Statement showed the UK was “certainly trying to carefully navigate these different challenges and we think that they are on the right track”.
The IMF expects the UK to grow in 2024, revising up its forecast to 0.9% from 0.6%.
Paul Johnson, director of the Institute for Fiscal Studies, said that the IMF’s forecasts were not always right, and he noted the fund was “actually being more optimistic than it was a few months ago”.
Forecasts from the Bank of England due later this week are likely to be more positive than they were two or three months ago, he added.
“My best guess is that the economy will be broadly stagnant this year. That we’re not going to get much in the way of growth but we’re not going to have a deep recession either,” he told the BBC’s Today programme.
“Now that’s not great, particularly as we should be bouncing back more strongly from Covid and particularly as we’ve not been growing terribly well for the last decade and more.”
