The UK will avoid recession in 2023, according to the IMF.
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LONDON – The International Monetary Fund said on Tuesday it expects the UK to avoid falling into recession and “maintain positive growth” in 2023.
The Fund said resilient demand amid falling energy prices had encouraged the positive, albeit “subdued” outlook.
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The UN financial agency noted that UK economic activity had slowed significantly, compared to last year, and that inflation, which is currently at 10.1%, remains “stubbornly high”. The UK economy continues to feel the impact of Russia’s large-scale invasion of Ukraine, as well as the lingering supply scarred by the Covid-19 pandemic.
The IMF said the UK has weathered recent global banking strains well, alluding to the recent collapse of Credit Suisse and the sector’s turmoil in the US.
The agency’s report describes maintaining the UK’s financial stability as a ‘global public good’ and recommends evidence-based reforms to London that address rising workforce inactivity post-pandemic, regulatory uncertainty around business investment and the country’s accelerating green transition.
Tuesday’s note provided a more positive development for the UK than the agency’s April World Economic Outlook. Forecasts from the previous month suggested that UK growth would contract by 0.3% in 2023, making it the worst performance in the G20 group. The latest release suggests that growth in the UK will now reach 0.4% this year, an improvement of 0.7 percentage points on the previous projection.
The IMF argues that UK GDP is likely to grow by 1% in 2024, then around 2% in 2025 and 2026.
Although somewhat pessimistic, recent reports are more muted than the IMF’s September statement, when the organization suggested that new measures introduced by the newly elected UK government would “likely increase inequality”. Many of these economic measures were later scrapped, with then-Prime Minister Liz Truss stepping down within 44 days of taking office.