UK growth will slow at worst in G7 next year amid soaring inflation, IMF says Business News

According to the International Monetary Fund (IMF), British economic growth will be dampened by the impact of the invasion of Ukraine and soaring inflation over the next two years.

In its latest World Economic Outlook update, the body cut its UK growth forecast for 2022 to 3.7% from the 4.7% it forecast in January. The IMF had already lowered its growth projection, after saying last October it expected a 5% rise.

The downgraded projection puts the UK on track for the worst growth of any G7 economy next year.

It comes as the IMF also cut its global growth outlook for 2022 to 3.6% from 4.4%.

“The global economic outlook has been severely damaged, largely due to Russia’s invasion of Ukraine,” the IMF said. “This crisis is unfolding even as the global economy has yet to fully recover from the pandemic.

“Even before the war, inflation in many countries had risen due to supply-demand imbalances and policy support during the pandemic, causing monetary policy to tighten.”

The IMF has warned that the war will “slow economic growth and increase inflation”, creating a more difficult environment as economies continue to recover from the pandemic.

He said he expects inflation to weaken spending in the UK and Europe.

The body said: “In the UK, consumption is expected to be weaker than expected as inflation erodes real disposable income, while tighter financial conditions should cool investment.”

Talk to the Financial Times, Shadow Chancellor Rachel Reeves said: “The IMF’s economic outlook shows the UK is set to experience the slowest growth in the G7 next year. Once again, the conservative economic strategy of low growth and high taxes is laid bare.

The downgrade comes after the UK grew by 7.4% last year as pandemic restrictions lifted.

Forecasts for UK economic growth next year have also been revised down sharply, with the IMF cutting its forecast for 2023 to 1.2% from 2.3% in January.

The IMF pointed out that the rise in prices caused by the invasion, especially of oil, gas, metals, wheat and corn, has led to a spike in food and fuel prices, which will have a particular impact. on low-income households.

As a result, the body said it now expects inflation to “stay elevated for much longer” than expected.

The IMF added: “There is a growing risk that inflation expectations will drift away from the central bank’s inflation targets, prompting a more aggressive tightening response from policymakers.”

In the UK, consumer price index (CPI) inflation hit 7% in March and is expected to remain well above the Bank of England’s target rate of 2%.

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This notice was published: 2022-04-19 21:16:37

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