The International Monetary Fund has said, the UK economy will shrink and perform worse than other advanced economies, including Russia, as the cost of living continues to hit households.
According to IMF, the economy will contract by 0.6% in 2023, rather than grow slightly as previously predicted, as the IMF also said, 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 stabilize economic growth, said it had downgraded its forecast for the UK because of its high energy prices, rising mortgage costs and increased taxes, as well as persistent worker shortages. It did not mention Brexit in its report as a factor for the UK not performing as well as others. Today marks three years since the UK left the EU.
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 BBC that last year, the UK had “one of the strongest growth numbers in Europe”, having expanded by 4.1%.
Figures released on Tuesday indicated that the Eurozone grew by 3.5% in 2022, while the economy of the whole European Union expanded by 3.6%.
Mr Gourinchas said this year’s forecast for the UK reflected its “high dependence” on expensive liquid natural gas, which had driven up the cost of living.
He said the government plans since November when it set out its spending plans in 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”.
BBC/Taiwo Akinola
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