Global economists were branded “pessimistic” about the UK after downgrading growth forecasts for next year. The International Monetary Fund said it expects Britain to record the weakest expansion across the G7 group of advanced economies in 2024.
But Tories have pointed out the forecaster has only been correct twice since 2016 and has had to change its predictions, admitting the UK’s fortunes were on the up.
Sir John Redwood said: “The IMF is regularly too pessimistic about the UK. It has often had to revise its forecasts. Let’s hope the Chancellor proves them wrong again.”
The UK has almost always outperformed IMF predictions and its latest analysis does not factor in recent changes in official figures.
These say that say the country recorded the G7’s third fastest recovery from the pandemic in the year after the outbreak. Its assessment is also based on market expectations in August for rising interest rates, which have since eased.
Britain has grown faster than France and Germany since 2020 and has secured the quickest expansion of any major European economy over the last 13 years.
Chancellor Jeremy Hunt said bringing down inflation remains the priority. He added: “The IMF have upgraded growth for this year and downgraded it for next. But longer term they say our growth will be higher than France, Germany or Italy. To get there we need to deal with inflation and do more to unlock growth, which I will be focusing on in the upcoming Autumn Statement.”
The IMF said UK interest rates are set to remain high for “a little while longer” due to concerns over persistent inflation. It also warned the global economy is “limping along” with persistent inflation and higher borrowing costs. The finance body marginally upgraded its growth forecast for UK gross domestic product this year to 0.5 percent from 0.4 percent.
It would be the second weakest performance in the G7, behind Germany. The IMF previously pointed towards 1 percent growth in 2024 but reduced the prediction to 0.6 percent due to interest rates.
It is the lowest growth forecast across the G7, while Canada is set to perform best at 1.6 percent. In its report, the finance body said: “The decline in (UK) growth reflects tighter monetary policies to curb still-high inflation and lingering impacts of the terms-of-trade shock from high energy prices.”
The Bank of England’s base interest rate is currently 5.25 percent. Inflation is forecast to be 7.7 percent for the year with a sharp fall to 3.7 percent next year, according to the IMF.
Director of research Pierre-Olivier Gourinchas said: “The general perspective on the UK is relatively subdued growth, falling momentum and a labour market which is cooling, but inflation remains quite persistent. That is going to require monetary policy to remain tight for a little while longer into next year.”
Global GDP is expected to rise by 3 percent this year and 2.9 percent next year, said the latest forecast.
Mr Gourinchas said: “The global economy continues to recover from the pandemic, Russia’s invasion of Ukraine and the cost-of-living crisis.
“In retrospect, the resilience has been remarkable. Despite war-disrupted energy and food markets and unprecedented monetary tightening to combat decades-high inflation, economic activity has slowed but not stalled. Even so, growth remains slow and uneven, with widening divergences. The global economy is limping along, not sprinting.”
Meanwhile, the Chancellor met key construction firms and investors at No10 yesterday. He set out plans for re-investing £36billion from the cancelled leg of HS2 into better transport links for more towns and cities.
As many as 10,000 homes will be built where the line finishes at Euston station in London with private investment.
