UK forecast to be one of worst performing economies in 2023 with latest IMF statistics

April 11, 2023

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UK forecast to be one of worst performing economies in 2023

The UK is set to be one of the worst performing major economies in the world this year, according to the latest forecast from the IMF.

The International Monetary Fund (IMF) says the UK economy's performance in 2023 will be the worst among the 20 biggest global economies.

It predicts the UK economy will shrink by 0.3% in 2023 and then grow by 1% next year, with the IMF already forecasting that the UK would experience a downturn this year and be bottom of the top ranking G7 nations.

Although the UK is forecast to have the worst economic performance this year, the IMF's latest prediction represents a small boost, from a previous forecast of a 0.6% contraction.

A number of forecasters think the chances of a recession in the UK this year are declining, as continued forecasts from monetary organisations point towards small boosts in the economic outlook, with Chancellor, Jeremy Hunt recognising these welcome changes in a recent announcement.

In 2024, Britain will finally see output rise, to 1% – tied with Japan but slightly ahead of Italy. Inflation is expected to fall from 9.1% in 2022 to 6.8% this year and 3% in 2024.

IMF warns of ‘hard landing’ for global economy if inflation persists

The IMF has warned of a “hard landing” for the global economy if persistently troublesome inflation continues to keep interest rates higher for longer, which only amplifies the growing financial risks. 

Although the fund left its overall economic forecasts largely unchanged from January in its latest World Economic Outlook, it has stated that signs of resilience alongside lower global energy and food prices have only masked deeper lying problems facing the current economic outlook.

In its twice-yearly full forecasts, the IMF said the disruption in the UK government bond market last autumn and the impacts of the US banking crisis last month showed the vulnerabilities that exist both amongst banks and non-bank financial institutions around the world.

The IMF’s new forecasts showed a 25% chance that the annual global growth rate could fall below 2% in 2023, a risk that has doubled from the normal amount. This news came as statistics published showed the global economy has only grown that slowly in five calendar years since 1970.

In the IMF’s unchanged central forecast, the global economy is expected to grow 2.8% in 2023, rising to 3% in 2024 and sticking at around that level until around 2028.

The US economic forecast has been raised versus the January forecast and the fund is now expecting growth of 1.6% in 2023 and 1.1% in 2024. 

Three months ago, the IMF was projecting a 1.4% increase this year followed by a 1% expansion the following year. The eurozone is expected to grow more slowly at 0.8% this year as member states deal with last year’s energy price increases before recovering to a 1.4% rate in 2024. 

China’s forecast growth rate of 5.2% in 2023 from the IMF is in line with the Beijing government’s target, although the fund expects it to slow to 4.5% in 2024.

With the latest forecasts published, the IMF has stated that if financial markets remained relatively stable, central banks should do everything they can to beat inflation and therefore lower interest rates.

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