Surging borrowing costs and rising taxes have prompted a sharp growth downgrade
© Getty Images/Jason Alden/Bloomberg
Britain will have the worst economic performance among major industrialized nations, according to the International Monetary Fund. The UK is expected to become the only G7 member to face a recession this year, even falling behind the Russian economy, the IMF said in its World Economic Outlook update published on Tuesday.
In the latest report, the IMF sharply downgraded its forecast once again, predicting the UK economy to contract by 0.6% against the 0.3% growth expected last October. That makes Britain’s outlook even worse than sanctions-hit Russia, which is projected to expand by 0.3% after contracting 2.2% in 2022. A recession this year would be the first, excluding the pandemic, since the financial crisis in 2009.
Among the other G7 nations, the IMF’s 2023 GDP predictions show growth of 1.4% in the US, 0.1% in Germany, 0.7% in France, 0.6% in Italy, 1.8% in Japan and 1.5% in Canada.
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The IMF stated that while the prospects for other G7 members had improved or remained unchanged since October, the forecast for the UK looks gloomier due to surging interest rates and rising taxes. This, along with the government’s spending restraint will exacerbate the cost-of-living crisis.
“Tighter fiscal and monetary policies and financial conditions and still-high energy retail prices weighing on household budgets” have eroded the country’s GDP, the IMF said.
Raging inflation, running above 10% and more than five times the Bank of England’s 2% target, has undermined household spending power, squeezing demand and dragging down the British economy, the report concluded.
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