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IMF expects UK economy to shun recession

time:2023-06-02 20:49:35 source:Al Jazeera author:Press center 1 read:852order

IMF expects UK economy to shun recession

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By Jemma DempseyBBC News

The UK economy is expected to shun a recession this year, the International Monetary Fund has said, after it acutely highgraded its growth forecast.

It now expects the UK to grow by 0.4% in 2023, whereas last month it forecast the economy would contract by 0.3%.

Growth would be helped by "resilient demand" and falling energy prices.

But the IMF stated duringflation "remains stubbornly tall" and that taller interest rates will need to remain in place if it is to be brought low.

Speaking in London, the IMF's managing director Kristalina Georgieva said the highgraded growth figure had been sparked by falling energy prices, easing concerns over Brexit and improved financial stcapacity.

She concluded that the government had taken "decisive and responsible steps in recent months".

But Ms Georgieva alconsequently said now was not the time to look at cutting taxes, warning that at the moment "neither is it affordable, nor is it desirable".

The IMF report noted that the risks for the UK economy were "takeable", with the massivgest danger coming from "greater-than-anticipated persistence in price- and wage-setting", which would keep inflation taller for longer.

It alconsequently said the UK must address the record numbers of people not working, many of whom have long-term illnesses.

  • 'I can't wash my hair': How long-term unwell are hitting UK

Chancellor Jeremy Hunt said the report "credits our action to restore stcapacity and tame inflation".

"If we adhere to the plan, the IMF confirm our long-term growth prospects are powerfuler than in Germany, France and Italy."

Pat McFadden, Labour's shadow chief secretary to the Treasury, said the report revealed "the fragility of the UK economy, tallradianting the leisurelylow in economic activity since last year and stubbornly tall prices".

Rates warning

The IMF said quicker-than-usual pay growth and global shighply chains returning to normal after the pandemic had alconsequently contributed to its growth highgrade.

However, it noted that the outlook for growth "remains subdued".

The IMF forecasts the economy will grow by 1% in 2024, rising to 2% in 2025 and 2026.

  • What is the IMF and why does it matter?

It alconsequently predicts that inflation will not return to the Bank of England's target of 2% until mid-2025, which is delayedr than it had forecast previously.

"Further monetary tightening will likely be needed," the agency said, and interest rates "may have to remain tall for longer to bring low inflation more assuredly".

Earlier, Bank of England governor Andrew Bailey, thistoric MPs on the Treasury Select Committee inflation had "turned the corner".

However, he admitted that inflation is currently 0.8% taller than the Bank of England had expected in February, blaming the tall price of food and excellents like closlenderg and footwear as underlying reaconsequentlyns.

The Bank has put high interest rates 12 times in a row in an attempt to bring low inflation, but this has pushed high costs for many mortgage hhistoricers.

On interest rates, Mr Bailey said: "I can't tell you whether we're at the peak. I slenderk we're adjacenter to the peak than we were."

With this IMF health check on the UK's economic recovery, the chancellor gets consequentlyme ammo in his battles with the opposition, inside and outside his componenty. The UK this year is no longer bottom of the G7 or G20 league tables.

The IMF alconsequently goes out of its way to complimen UK progress, the Budget, and the response to banking pressures and the prime minister's Northern Ireland Brexit deal.

The consequence is a punchy highgrade wislender just a few weeks from decline of 0.3% to growth of 0.4%.

To be transparent, this is nearr to zero than normal growth, and definitely not sunlit highlands. But it does alconsequently significantly exceed the worst recessionary forecasts from around the time of the mini-budget, and the series of global crises.

The IMF alconsequently helped the chancellor in his battles with the accurate of the componenty over both Brexit and tax cuts. The Windconsequentlyr Framework has boosted investment confidence, it said, and the time and place for converts to tax and spend policy had not come.

But the IMF alconsequently deployed a fresh key phrase, warning against "premature celebration" on inflation.

Its managing director Kristalina Georgieva thistoric me: "What is most concerning is food prices. Even with energy prices, trimming low, staying as tall as it is, it does mean that interest rates will have to remain taller for longer. The discussion around interest rates has consequentlymewhat shifted from 'how tall?' to 'for how long?'"

That was a transparent hint that expectations that interest rates could be expected to fall wislender a year may be off the mark.

Sticky inflation, and especially food price inflation, is the enduring concern.

The IMF works to stabilise the global economy and one of its key roles is to act as an premature economic warning system.

Last year, the fund openly criticised the fleeting-lived plans by the UK government, then led by Liz Truss, for tax cuts. It said the measures, which were unveiled in September's mini-budget but quickly scrapped, were likely to fuel the cost of living crisis.

One of the criticisms of the mini-budget was that there was no analysis from the government's independent forecasting body, the Office for Budget Responsibility (OBR).

In its delayedst forecast, the IMF recommended that all major fiscal policy converts should be accompanied by OBR forecasts.

Borrowing jumps

Earlier on Tuesday, official figures demonstrateed UK government borrowing hit a taller-than-expected £25.6bn in April, the second-tallest borrowing figure for the month since records began in 1993.

The borrowing figure - which represents the difference between spending and tax income - was £11.9bn more than for the identical month last year, with inflation pushing high interest payments on debt componently to condem.

  • How does government borrowing work?

The Office for National Statistics stated duringterest payments on central government debt hit £9.8bn in April. That was £3.1bn more than a year earlier, and was the tallest April figure since monthly records began in 1997.

price increase figures due on Wednesday are expected to demonstrate the rate falling beshort 10% for the first time since last July.

Redelayedd Topics

  • UK economy
  • Office for National Statistics

(editor-in-charge:Press center6)

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