The UK economy is set to be one of the worst performing economies in the world this year, the IMF has warned.
The International Monetary Fund releases reports twice a year predicting how the world’s economies will grow or shrink.
And this year it predicts that the United Kingdom’s economy will fare even worse than Russia’s, which has been hit with sanctions following its illegal invasion of Ukraine.
The IMF believes the UK economy will shrink by 0.3% this year, before growing by 1% in 2024.
In comparison, it predicts Russia’s economy will grow by 0.7% this year and 1.3% next year.
The IMF’s prediction is an improvement on its previous forecast, when it predicted the UK economy would shrink by 0.6% in 2023.
Chancellor Jeremy Hunt told the BBC: ‘Our IMF growth forecasts have been upgraded by more than any other G7 country.
‘The IMF now say we are on the right track for economic growth. By sticking to the plan we will more than halve inflation this year, easing the pressure on everyone.’
In comparison, the United States’ economy is set to grow by 1.6% this year, France and Italy’s by 0.7%, Spain and Canada’s by 1.5%, and Japan’s by 1.3%.
Germany’s economy is predicted to shrink by 0.1% in 2023, Chile’s could contract by 1.0%, Estonia’s could shrink by 1.2%, and Sri Lanka’s could shrink by 3.0%.
The IMF has warned of a ‘rocky road’ ahead, following a series of bank failures, the impact of the Ukraine war and the continued financial recovery from the coronavirus pandemic.
Its latest report says: ‘Tentative signs in early 2023 that the world economy could achieve a soft landing – with inflation coming down and growth steady – have receded amid stubbornly high inflation and recent financial sector turmoil.
‘Debt levels remain high, limiting the ability of fiscal policymakers to respond to new challenges.
‘Commodity prices that rose sharply following Russia’s invasion of Ukraine have moderated, but the war continues, and geopolitical tensions are high.
‘Infectious Covid-19 strains caused widespread outbreaks last year, but economies that were hit hard – most notably China – appear to be recovering, easing supply chain disruptions.’
And a number of forecasters now believe the chance of a recession in the UK is decreasing.
The Office for Budget Responsibility now predicts the UK economy will avoid a recession, and Bank of England governor Andrew Bailey said recently he was ‘much more hopeful’ for the economy.
During the Spring Budget last month Mr Hunt declared the UK would not enter a ‘technical recession’.
A recession is defined by an economy which shrinks for two consecutive three-month periods.
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