Britain to suffer weakest growth in G7 as Sunak tax raid bites Business

Paul Dales, an expert at Capital Economics, said: ‘There is going to be a drag on economic activity relative to if National Insurance has not been increased.

“The Chancellor seems to be emphasizing the reduction of borrowing and the consolidation of public finances. He’s trying to win a political argument really before the next election, when the economic thing would be to support the economy right now.

It came as the IMF’s chief economist warned that the war in Ukraine could lead to the world splitting into two economic blocs, which would be a “disaster for the global economy”.

There are fears that China and Russia could create a financial system to compete with the West after the imposition of harsh sanctions on the Kremlin. The West kicked Russian banks out of the global Swift payments messaging system, and Chinese operator UnionPay stepped in to help after Visa and Mastercard suspended operations in the country.

Mr Gourinchas said: “The war also increases the risk of a more permanent fragmentation of the global economy into geopolitical blocs with distinct technological standards, cross-border payment systems and reserve currencies.”

He said this “tectonic shift” would have huge economic consequences and pose a major challenge to “the rules-based framework that has governed international and economic relations for the past 75 years”.

The IMF said global growth would slow sharply from 6.1% in 2021 to 3.6% this year, 0.8 percentage points lower than expected in January, after the outlook “significantly deteriorated “.