The International Monetary Fund (IMF) has lowered its economic growth predictions for the UK leaving it on course to be the worst performing G7 country in 2023.
The IMF predicted that UK GDP will fall by 0.6% this year, which is a 0.9 percentage points downward revision from October’s forecasts for growth of 0.3%.
But it nudged up its outlook for UK growth in 2024 to 0.9%, up from the 0.6% expansion previously forecast.
The Washington-based agency blamed the downgrade on tighter government spending policies and higher interest rates and the burden from still-high energy retail prices on household budgets.
IMF Growth Projections: 2023
USA????????: 1.4%
Germany????????: 0.1%
France????????: 0.7%
Italy????????: 0.6%
Japan????????: 1.8%
UK????????: -0.6%
China????????: 5.2%
India????????: 6.1%
Russia????????: 0.3%
Brazil????????: 1.2%
Mexico????????: 1.7%
KSA????????: 2.6%
Nigeria????????: 3.2%
RSA????????: 1.2% https://t.co/4ifKc9qi4j #WEO pic.twitter.com/qELAmtqXLP
— IMF (@IMFNews) January 31, 2023
Pierre-Olivier Gourinchas, the IMF’s economic counsellor, said that 2023 would be “quite challenging” for the UK as it slipped from top to bottom of the G7 league table. “There is a sharp correction," he added, according to a BBC News website report.
However, the forecast was still below the UK's Office for Budget Responsibility (OBR) prediction for a fall of 1.4% in 2023, and that of the Bank of England which expects a 1.5% contraction.
There is speculation that the Bank will revise this forecast upwards on Thursday when it announces its latest interest rate decision. Falling energy prices and inflation rates have boosted hopes that any slowdown will be shallower than feared.
Chancellor, Jeremy Hunt, responded by saying nearly all advanced economies were facing headwinds.
Hunt told BBC News: “The governor of the Bank of England recently said that any UK recession this year is likely to be shallower than previously predicted, however, these figures confirm we are not immune to the pressures hitting nearly all advanced economies.”
But Rachel Reeves, Labour’s shadow chancellor, suggested the forecasts show Britain needs a proper plan for growth.
"Britain has huge potential - but too many signs are pointing towards really difficult times for our economy, leaving us lagging behind our peers," Reeves noted, according to the BBC report.