The International Monetary Fund (IMF) has predicted in its latest report that the UK economy will shrink this year and record the worst performance compared to other G7 countries. The IMF’s position for the UK economy in 2023 is rather pessimistic. What was the basis of the IMF’s forecast for the UK economy? Moreover, what do other financial institutions predict about the UK economy?
The dark outlook of the world economy in 2023
The IMF has drawn a gloomy outlook for the world economy, especially the industrialized countries on the brink of recession. According to this report, the UK economy will shrink by 0.3% due to rising energy costs and unprecedented inflation. The IMF UK economic forecast shows negative changes.
The basis of the IMF forecast for the UK economy
The IMF said it lowered its forecast based on high energy prices, rising mortgage and tax increases, and persistent labour shortages in the UK. This organization has also predicted that the UK will be the only country whose economy will shrink next year (2024) compared to all advanced and emerging economies, even Russia, which is under sanctions.
Low world economic growth in 2023
According to the IMF, below-average growth will determine inflation and risk in the financial sector of the world economy in the coming years. While more than a year has passed since the Russian attack on Ukraine and the spread of new types of Covid-19, many economies have not yet fully coped with this shock.
UK’s reaction to the IMF report
The IMF UK economic forecast brought the reaction of the British authorities. In response to the report of the IMF, Chancellor of the Exchequer Jeremy Hunt claimed that the UK’s economy is on the right track and inflation will be halved this year, as promised by the government. Responding to this forecast, Hunt said the UK did better than many predicted last year, implicitly questioning the IMF’s assessment. However, UK Shadow Chancellor of the Exchequer Rachel Reeves said the IMF’s forecasts show how far the UK is lagging on the world stage and that this is the result of 13 years of Conservative government rule.
Successive crises of the UK economy
Liberal Democrat MP Layla Moran also said that the UK is the only developed country where businesses face additional costs and red tape due to Brexit. The UK economy has entered a recession period due to several successive crises. The inflation rate has reached 11% from 2%, and the country is in an economic recession.
Economic challenges for the next two years in the UK
The IMF UK economic forecast has alerted the British authorities. Bank of England governor Andrew Bailey warned of financial challenges over the next two years, saying the UK was facing a very challenging recession and that families would be in for a tough time. The Bank’s Monetary Policy Committee has increased the base interest rate by 4.25% to curb inflation. In this way, a few hundred more pounds have been added to the monthly instalments of British mortgages. British media describe this increase as painful for millions of citizens who owe the bank.
Intensification of the UK economic crisis with Brexit
The media have confirmed the IMF UK economic forecast. Not long ago, the Economist called the current state of the UK economy a chronic crisis, worsened by the country’s withdrawal from the EU. The government tends to think of itself as a dynamic, free-market place, but its economy needs to catch up to many of the world’s rich countries. According to the Economist, a deep hole has taken root in the UK economy and leaving the EU has worsened the situation. The IMF UK economic forecast results, show the harmful effects of Brexit.
OECD forecast of the UK economy
Although all European countries are in an economic crisis and inflation has increased rampant, according to the Organization for Economic Cooperation and Development (OECD) assessment, the UK economy is in the worst condition compared to other G7 countries. According to the estimate of this international organization, the UK’s GDP is set to decrease by 0.4% this year and grow by only 0.2% the following year (2024). Of course, this figure is better than the previous forecast of the OECD, which ruled out economic growth.
The poor state of the UK economy among the G20 countries
According to this report, the UK economy will experience the worst situation among the G20 countries after Russia and Sweden. The Organization for Economic Cooperation and Development has predicted that the British government’s financial assistance to deal with the increase in energy prices will increase inflation, raise the interest rate, and, as a result, increase debt. The Organization for Economic Cooperation and Development has predicted that the inflation rate will remain at 10% in the coming months due to high energy prices and will reach 2.7% by the end of 2024.
The shrinking of the UK economy and its consequences
A shrinking economy means that companies make less money, and the number of unemployed people increases. UK officials insist that IMF forecasts have only sometimes been correct. British Minister for Local Roads and Transport Richard Holden told Sky News that the statistics of IMF have been wrong in recent years, and according to his prediction, the UK economy will record a better performance. The best forecast is that the UK economy will generally stagnate this year. The UK will not be on a growth path, nor will it be in a deep recession.