IMF points to UK 'resilience' as it confirms no recession this year

IMF points to UK ‘resilience’ as it confirms the economy won’t go into recession this year – but growth will be among lowest in the G7

The IMF pointed to the UK’s ‘resilience’ today as it confirmed the economy is set to avoid recession this year.

The international body confirmed big upgrades for Britain in its latest World Economic Outlook update.

However, despite the improved prospects the UK is still expected to be the second slowest-growing member of the G7.

GDP is predicted to increase by 0.4 per cent during 2023, with only Germany performing worse among the elite group.

Growth in the US is set to be the most rapid of all G7 countries at 1.8 per cent, according to the IMF.

This will be followed by Canada (1.7 per cent), Japan (1.4 per cent), Italy (1.1 per cent), France (0.8 per cent), the UK (0.4 per cent) and Germany, where output is expected to shrink 0.3 per cent.

The IMF confirmed big upgrades for Britain in its latest World Economic Outlook update – but growth is still set to be slower than most of the G7

‘Growth in the United Kingdom is projected to decline from 4.1 per cent in 2022 to 0.4 per cent in 2023, then to rise to 1 per cent in 2024,’ the IMF said.

‘This is an upward revision of 0.7 percentage points for 2023, reflecting stronger-than-expected consumption and investment from the confidence effects of falling energy prices, lower post-Brexit uncertainty (following the Windsor Framework agreement), and a resilient financial sector as the March global banking stress dissipates.’

It is the latest in a series of IMF forecasts which expect the UK to lag behind many international peers this year.

But the Government has previously pushed back against this, with Chancellor Jeremy Hunt being overheard by Sky News in April telling IMF boss Kristalina Georgieva that ‘we’re very focused on proving you wrong’.

The Treasury said: ‘The IMF have praised the UK’s decisive action to fight inflation, and today’s report confirms a big upgrade to our growth forecast compared to April, with the UK set to grow at the same rate as the United States and Japan next year.

‘The IMF also say it’s important to rebuild our finances and maintain financial stability; that’s why we have a clear plan to halve inflation this year, grow the economy and get debt falling.’

The IMF gave a more optimistic assessment of the way the world is recovering from Covid, and said most countries are making progress in curbing inflation.

‘Following the build-up of gas inventories in Europe and weaker-than-expected demand in China, energy and food prices have dropped substantially from their 2022 peaks, although food prices remain elevated,’ it added.

Across all advanced economies, which includes the G7 and other countries, growth is expected to drop from 2.7 per cent to 1.5 per cent in 2023.

It expects global growth to reach 3 per cent.

The IMF also said that a push on green investment was needed to make sure that there is enough energy to meet countries’ green targets.

IMF director of research, Pierre-Olivier Gourinchas, said: ‘The global economy continues to gradually recover from the pandemic and Russia’s invasion of Ukraine.

‘In the near term, the signs of progress are undeniable.

The IMF predicted in January that the UK would be the worst-performing major economy in 2023 – with a 0.6 per cent fall in GDP, even worse than Russia. However, by April that was down to a 0.3 per cent fall, and in May the body conceded that there was likely to be 0.4 per cent growth – an assessment it stood by today

‘The Covid-19 health crisis is officially over, and supply-chain disruptions have returned to pre-pandemic levels.

‘Economic activity in the first quarter of the year proved resilient, despite the challenging environment, amid surprisingly strong labour markets.

‘Energy and food prices have come down sharply from their war-induced peaks, allowing global inflation pressures to ease faster than expected.

‘And financial instability following the March banking turmoil remains contained thanks to forceful action by the US and Swiss authorities.’

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