The UK economy will shrink and perform worse than other advanced economies, including Russia, as the cost of living continues to hit households, the International Monetary Fund has said. UK expected to be only major country to shrink in 2023.
The IMF said the economy will contract by 0.6% in 2023, rather than grow slightly as previously predicted. However, the IMF also said that after the Autumn Statement plans it thinks the UK is now “on the right track”.
Chancellor Jeremy Hunt said the UK outperformed many forecasts last year. But shadow chancellor Rachel Reeves said the figures showed the UK “lagging behind our peers”.
The IMF, which works to stabilise economic growth, said its new forecast reflected the UK’s high energy prices and factors such as high inflation.
The UK is expected to be the only country to shrink next year across all the advanced and emerging economies. Even sanctions-hit Russia is now forecast to grow this year.
If a country’s economy shrinks, typically this means companies make less money and the number of people unemployed rises. IMF chief economist Pierre-Olivier Gourinchas told the sources that last year, the UK had “one of the strongest growth numbers in Europe”.
He said this year’s forecast reflected the UK’s “high dependence on liquid natural gas” and that employment was still below pre-pandemic levels. UK expected to be only major country to shrink in 2023.
Mr Gourinchas said the plans outlined by the Treasury in the months since the Autumn Statement showed the UK was “certainly trying to carefully navigate these different challenges and we think that they are on the right track”.
The IMF expects the UK to grow in 2024, revising up its forecast to 0.9% from 0.6%.
