(IMF) has forecasted that the UK is likely to be the only major economy to shrink in 2023

 The International Monetary Fund has warned that the UK economy is set to shrink and lag behind other advanced economies, such as Russia, as the cost of living continues to affect households.

The IMF has reported that the UK economy is anticipated to contract by 0.6% in 2023, rather than the slight growth it previously predicted. Nevertheless, the IMF believes that the UK is “on the right track”.Chancellor Jeremy Hunt declared that the UK surpassed many forecasts in the past year. But Shadow Chancellor Rachel Reeves stated that the figures show the UK “lagging behind our peers”.

The IMF, which works to maintain economic expansion, attributed the UK’s lower performance to higher energy costs, increasing mortgage costs, taxes and sustained worker shortages. Brexit was not mentioned as a factor in the report. Today marks three years since Brexit.

The UK is the only nation expected to shrink in 2023 amongst the advanced and emerging economies. Even Russia, which is subject to sanctions, is now predicted to grow this year.

The UK economy is predicted to shrink this year according to the International Monetary Fund (IMF). This could lead to fewer profits for companies and an increase in unemployment.

IMF Chief Economist Pierre-Olivier Gourinchas has commented that the UK had “one of the strongest growth numbers in Europe” last year, but noted its “high dependence” on expensive liquid natural gas, which has pushed up the cost of living.

He believes the government’s plans since the Autumn Statement of November 2019 have been heading in the correct direction in an attempt to tackle the challenges posed by the economy shrinking.

The IMF has revised its growth forecast for the UK in 2024 up to 0.9% from 0.6%, with Paul Johnson, director of the Institute for Fiscal Studies, noting that these forecasts are not always accurate.

He suggested the Bank of England’s predictions due out this week are likely to be more positive than they were a couple of months ago.Johnson went on to say that he believes the UK economy will stay “broadly stagnant” this year, not growing “terribly well” for the last decade and more. He added that this is not ideal, as the country should be recovering more strongly from the pandemic.

The International Monetary Fund (IMF) has forecasted a less positive outlook for the UK, citing rapid interest rate increases, tax rises, increased borrowing costs for businesses and persistent high domestic energy prices. They have declared that the UK is facing a highly complex situation.

This forecast implies that the UK may miss out on the advantageous global economic environment, becoming the only economy among the 15 featured in the report to shrink.

The Bank of England will provide an updated forecast of the UK economy this week, along with a probable interest rate increase.

The International Monetary Fund’s (IMF) outlook for the UK is gloomy, following Health Secretary Matt Hunt’s warning that there is little scope for any “significant” tax cuts in the Spring Budget.

Chancellor Rishi Sunak, who has been urged by some in his party to cut taxes to boost the economy, has mentioned that reducing inflation is the best form of tax relief at present.

Currently, inflation is close to its highest rate in four decades. Sunak has also promised to halve inflation by the end of 2021, but many believe that this should be achievable due to energy cost decreases and a reduction in post-pandemic supply issues.

The Office for Budget Responsibility (OBR) forecasts that inflation should fall to 3.75% by the end of the year – well below half its current rate.

Andrew Bailey, the governor of the Bank of England, has stated that inflation is likely to diminish quickly in 2021; however, he has cautioned that a UK recession is still foreseeable.

The IMF has predicted the UK economy will shrink, yet predicts US economic growth of 1.4%, Germany 0.1% and France 0.7%.

Mr Hunt declared that the IMF’s data confirms that the UK is not protected from the effects of global economic pressures experienced by most advanced nations. He further remarked that although there are short-term obstacles, the UK is still predicted to have a faster growth rate than Germany and Japan in the upcoming years, if inflation is reduced.T

he IMF has stated that its estimations of the performance of advanced economies, including the UK’s, have been accurate within 1.5 percentage points. They also commented on the impact of the increase in interest rates to combat inflation, as well as the war in Ukraine, on economic activity worldwide.

The IMF also noted the positive effect of China returning to pre-Covid normalcy, which is setting a precedent for a quicker global recovery.