The International Monetary Fund (IMF) forecasts that the UK will be the only country in the G7 to experience negative growth this year. Concerns about low growth have continued for nearly 10 years, and even concerns have been raised that the longest period of recession since the global financial crisis could occur.
In its World Economic Outlook (WEO) report released on the 30th (local time), the IMF predicted that the UK's economic growth rate would contract by -0.6% this year. This is 0.9 percentage point lower than the figure announced in October last year.
The IMF cited government spending cuts and the exacerbating cost of living crisis due to high interest rates and tax increases as the reasons for such a forecast on the British economy. Inflation has slowed due to the introduction of the government's energy price cap, but it is still above 10%. In addition, inflationary pressures remain due to rising energy supply costs.
The International Monetary Fund (IMF) predicts that the UK will face its darkest two years until 2024, saying it will be the first country to face a recession since the 2008 financial crisis.
From the COVID-19 pandemic to the energy crisis, the UK has been relatively sluggish in its recovery compared to other European countries. In addition, former British Prime Minister Liz Truss pushed for a reckless tax cut of 45 billion pounds (about 68 trillion won) when she was in office in September, raising borrowing costs for businesses and households and contributing to sluggish growth. The IMF predicted that consumption, which drives the UK economy, is unlikely to improve in the near future due to high interest rates, and that businesses are also not strong enough to lead growth.
The Bank of England (BOE), like other central banks, is also showing moves to respond to high inflation and is expected to raise its benchmark interest rate by 0.5 percentage point to 4.0% on the 2nd.
The IMF said, “This year, the United States (1.4%), Germany (0.1%), France (0.7%), Italy (0.6%), and Japan (1.8%) recorded growth rates, and the United Kingdom showed a negative economic growth rate this year among the G7 countries. It will be the only country.”
The IMF raised its global economic growth rate this year to 2.9%, 0.2 percentage point higher than the previous forecast. [Asia Economy]