The International Monetary Fund (IMF) has said the UK economy will shrink and perform worse than other advanced economies as the cost of living falls on households.
The IMF said the economy would shrink by 0.6 percent in 2023, rather than previously forecast.
However, the IMF also said it believed the UK economy was now “on the right track” following the autumn statement.
Chancellor Jeremy Hunt said Britain had done better than many had predicted last year.
In its World Economic Outlook update, the IMF, which works to stabilize economic growth, said Britain’s gross domestic product (GDP) would contract this year rather than grow by 0.3%.
It predicts that the UK will be the only country – among the world’s developed and emerging economies – to suffer a year of falling GDP.
The IMF said its new forecast reflected higher UK energy prices and financial conditions such as higher inflation.
The IMF’s chief economist Pierre-Olivier Gournchas told JEE News that Britain’s growth rate for 2022 was 4.1 percent, which he said was “one of the strongest growth in Europe.”
“But it is true that we are forecasting a sharp slowdown in 2023, with growth also turning negative for the year.”
He said the review reflected the fact that “we have a very challenging environment in the UK”, which he said was due to high energy prices as well as a “high reliance on liquefied natural gas”.
“As a response to this high inflation, monetary policy is being tightened by the Bank of England and in the UK this quickly translates into mortgages, as many mortgage rates are adjustable,” he said. are.”
“So many owner-occupiers are seeing an increase in their mortgage payments.”
Mr Gorenchas also said a factor in the UK forecast was that employment was still below pre-pandemic levels.
He said the plans outlined by the Treasury in the months since the Autumn Statement showed that the UK was “certainly trying to carefully navigate these various challenges and we think they are on the right track.” are on”.
However, the IMF said it expected UK growth to be 0.9% in 2024, up from 0.6% previously.
GDP is a measure of how well or poorly an economy is doing, and in a growing economy, each quarter’s GDP will be slightly larger than the previous quarter.
If a country’s GDP falls for two consecutive quarters, it means that it is in recession and it is a sign that its economy is doing badly. Generally, when a country is in recession, companies make less money and the number of unemployed people increases.
