The forecast is in stark contrast to the latest update
Chancellor Jeremy Hunt. The International Monetary Fund said it does not expect the UK to slip into recession this year.
The International Monetary Fund (IMF) said it does not expect the UK to slip into recession this year, a dramatic improvement on its previous forecast.
In an update to recent forecasts, it said: “Supported by resilient demand in the context of falling energy prices, the UK economy is expected to avoid recession and maintain positive growth into 2023.”
But it said growth prospects remain “moderate”, with growth of 0.4 percent this year.
The IMF said the change reflects a “higher-than-expected resilience” in both supply and demand, citing improved confidence in reduced post-Brexit uncertainty and falling energy costs.
Chancellor Jeremy Hunt said the IMF report shows a “major improvement” for the country’s growth prospects and praised the government for “action to restore stability and curb inflation”.
“It praises our child care reforms, the Windsor Framework and business investment incentives,” he said.
“If we stick to the plan, the IMF confirms that our long-term growth prospects are stronger than in Germany, France and Italy, but the job is not done yet.”
Economists at the IMF have left the growth forecast for 2024 unchanged, with the economy expected to grow by 1 percent next year.
“Growth is expected to rise gradually to 1 percent in 2024 as disinflation softens the blow to real incomes, and to average around 2 percent in 2025 and 2026, mainly due to an expected easing of monetary and financial conditions.” said the IMF.
But the report does endorse the UK’s solving skills shortages among immigrants, amid debate in Westminster over public policy ahead of the release of new data this week on net migration.
According to the IMF, the UK should look at “refining the immigration system to reduce sectoral and skilled labor and increase labor market flexibility”.
Ministers have come under pressure from some quarters to draw up plans to curb net migration, with the Office for National Statistics set to release figures this week that could show that in the 12 months to December 2022, at least reached 700,000.
The IMF also pointed positively that the UK and the EU finally reached an agreement on the Northern Ireland Protocol, while also noting that the “more measured approach to preserve EU laws” is something that will benefit business.
The recent winding down of post-Brexit plans to scrap EU laws has sparked backward anger among Conservatives, but there have been signs of better relations between London and Brussels in recent months.
In the report, the IMF expresses hope that a return from the UK to the EU’s €100 billion Horizon programme, something ministers are aiming for, could improve small and medium-sized businesses’ access to finance and research and design support .
The Article IV report, an assessment of the UK economy, also indicates that the country could face high interest rates for some time to come as the Bank of England fights inflation.
The Bank raised its base rate to 4.5 percent earlier this month – the 12th straight increase since interest rates began to rise in December 2021.
According to the IMF, “monetary policy will need to remain tight to keep inflation expectations firmly anchored and inflation back on target.
“Inflation is not expected to return to the 2 percent target until mid-2025, six months later than in the April workforce forecast, and risks to this trajectory are on the upside.”
It added that “further monetary tightening is likely to be needed and interest rates may need to stay high longer to bring inflation down with more certainty”.
