UK Economic Growth Forecast for 2024 Downgraded by IMF
IMF Revises UK’s Economic Growth Forecast Downwards
The International Monetary Fund (IMF) has revised the UK’s economic growth forecast for 2024 downwards to 0.6%, making it the worst-performing economy among the G7 nations. The downgrade is primarily attributed to the impact of high inflation and increased interest rates on households and businesses.
Reasons Behind the Decline
The IMF attributes this decline to the tightening of monetary policies aimed at controlling inflation, as well as the negative impact of soaring energy prices. Initially, the revised forecast was based on the assumption that UK interest rates would reach 6%, but this scenario is now considered unlikely.
Comparative Performance
Despite the challenges faced by the UK, economies such as the US, Germany, France, Russia, and Ukraine are projected to outperform it. The IMF also predicts a global GDP increase of 3% this year and 2.9% next year, although there will be variations in economic performance across different countries.
Resilience of the Global Economy
While acknowledging the impact of challenges such as Russia’s invasion of Ukraine and the cost-of-living crisis, the IMF’s research director, Pierre-Olivier Gourinchas, emphasizes that global economic activity has slowed but not stalled. He describes the global economy as “limping along” and highlights its resilience.
Upgraded Growth Prediction for the UK
Contrary to the gloomy forecast for 2024, the IMF has upgraded its growth prediction for the UK three times this year, raising its GDP growth estimate from 0.4% to 0.5%. However, the IMF warns of “structural” borrowing that could reach approximately £90bn or 3.5% of GDP by 2028.
Challenges for the UK Government
This warning poses a significant challenge for Chancellor Rishi Sunak and Jeremy Hunt. Both are under pressure from Tory MPs to reduce taxes while striving to meet fiscal targets, including Sunak’s goal to halve the headline rate. The IMF also predicts the UK’s Consumer Price Index (CPI) inflation to peak at 7.7% this year before sharply declining to 3.7% next year.
The Outlook for Canada
In contrast, Canada is expected to lead G7 growth with a rate of 1.6%. These predictions provide insights into the economic landscape and potential opportunities for different countries.
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