The United Kingdom will witness a huge decline in its economy and perform much worse than other bigger economies in 2023, said the International Monetary Fund. The major reason cited by the IMF is the higher cost of living.
According to the IMF, the economy will shrink by 0.6% in 2023, instead of growing narrowly as predicted earlier.
The IMF is the major financial agency of the United Nations, and its stated mission is “working to foster global monetary cooperation and secure financial stability.”
But the global financial agency also commented that it thinks the European country is now “on the right track”. IMF chief economist Pierre-Olivier Gourinchas said the government plans, from November it made its spending plans in the Autumn Statement, depicted that the UK was “certainly trying to carefully navigate these different challenges and we think that they are on the right track”.
Chancellor Jeremy Hunt said the UK outdone many predictions last year. But shadow chancellor of the exchequer, Rachel Reeves, on the contrary, said the data showed the UK “lagging behind our peers”.
The IMF claimed that it has lowered its prediction for the UK as a result of the country’s high energy costs, rising mortgage rates, more taxes, and ongoing labor shortages. Brexit was not mentioned in the study as a reason for the UK not doing as well as other countries. Three years have passed since the UK exited the EU.
Among the G7 nations as well as other rich economies, the UK is considered as the sole economy to contract in 2023.
A shrinking economy indicates that it produces less financial growth and the number of unemployed people rises.
Gourinchas, while speaking to the BBC last year, said the UK had “one of the strongest growth numbers in Europe”.
However, he claimed that the estimate for this year demonstrated its “heavy dependency” on pricey liquefied natural gas, which has increased the expense of life.
The IMF believes the UK will grow in 2024, changing its forecast to 0.9% from 0.6%.
Amidst the IMF’s predictions, the UK came out to be the only country to experience a marked low graph to growth forecasts since the autumn, and the only prominent G7 country to be predicted to shrink this year.
The IMF also said that though it is likely that almost all the members of the G7 group of developed nations had improved in their economy or at least remained unchanged since October, factors like rising interest rates and growing taxes had made the prospect for the UK worse. The IMF said that the UK economy is even slower than Russia, which is affected by many sanctions from the West.
The IMF’s prediction for the UK economy was made after Hunt warned it was “unlikely” that there would be any “significant” tax cuts in the Spring Budget.
Politically, this has added to the woes of Prime Minister Rishi Sunak, after he sacked the Conservative party chair Nadhim Zahawi.
The IMF’s update to its semi-annual World Economic Outlook (WEO), a health check on the global economy released in April and October, downgraded UK growth.