IMF Projects Britain As Only Major Industrialised Nation To Shrink This Year

In its World Economic Outlook, the IMF warned that it expected the UK economy to contract by 0.6 per cent this year – 0.9 percentage points worse than it had forecast just three months ago

In its World Economic Outlook released on Monday, the International Monetary Fund (IMF) projected Britain to be the only major industrialised country to witness the economy shrinking this year. The IMF warned that it expected the UK economy to contract by 0.6 per cent this year – 0.9 percentage points worse than it had predicted three months ago and perhaps slower even than sanctions-hit Russia, according to the publication Guardian.

Liz Truss’s brief premiership triggered a sharp growth downgrade from the IMF along with the growing political pressure on UK PM Rishi Sunak after the sacking of the Conservative Party Chair Nadhim Zahawi. The growth projection reflects Britain’s tighter fiscal and monetary policies and financial conditions and still-high energy retail prices weighing on household budgets, the IMF wrote in its outlook.

The IMF noted that the prospects for every other country in the G7 group that comprised of leading developed nations had improved or remained unchanged since October. However, rising interest rates and higher taxes had worsened the outlook for the UK.

The IMF said the global growth is expected to slow from 3.4 per cent in 2022 to 2.9 per cent in 2023 in a press briefing held in Singapore during the launch of the January update of the World Economic Outlook report.

Bank of England is aiming to raise interest rates for 10th time in a row, the publication added.

Pierre-Olivier Gourinchas, the IMF’s economic counsellor, noted 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, as per the report.

Meanwhile, the UK chancellor, Jeremy Hunt, last week pointed out that a sense of declinism was impeding the UK’s recovery, and came under pressure to offer a credible plan to boost growth. His speech, which focused on “enterprise, education, employment and everywhere”, was widely criticised by business leaders.

The October 2022 WEO was completed before the tax-cutting mini budget from the then-chancellor, Kwasi Kwarteng, in late September and pencilled in growth of 0.3 per cent for 2023. In its update, the IMF said the UK had performed more strongly in 2022 than anticipated, growing by 4.1 per cent rather than the 3.6 per cent expected three months ago.