UK expected to avoid recession in 2023, maintain positive growth: IMF

Inflation is showing greater-than-expected persistence, IMF noted.

The IMF Article IV Mission has concluded that the UK economy is likely to avoid a recession and maintain positive growth this year, buoyed by resilient demand.
IMF forecast growth to slow to 0.4 per cent, held back by tighter monetary and fiscal policies needed to curb inflation, which stays stubbornly high, and lingering impacts of the terms-of-trade shock.

The UK financial system has weathered the recent global banking stress well. Still, economic activity has slowed significantly from last year, IMF noted.

Continued strong oversight, including of smaller banks and the diverse non-bank financial sector, will be critical to preserve UK financial stability, which the IMF sees as a global public good.

The outlook for growth remains subdued. IMF forecast growth to slow to 0.4 per cent in 2023, held back by tighter monetary and fiscal policies needed to curb inflation, and lingering impacts of the terms-of-trade shock.

UK growth is projected to rise gradually to 1 per cent in 2024, as disinflation softens the hit to real incomes, and to average around 2 per cent in 2025 and 2026, mainly on the back of a projected easing in monetary and financial conditions.

Thereafter, growth is projected to settle at 1.5 per cent. Declining energy prices and widening economic slack are expected to substantially reduce inflation to around 5 per cent year on year by end-2023; and below the 2 per cent target by mid-2025.

The UK authorities are cognizant of, and taking measures to, address the UK’s long-term challenges of weak labour supply, investment and productivity growth, IMF noted.

The country’s green transition should be expedited to meet Net Zero objectives and enhance energy security, IMF suggested.

Fibre2Fashion News Desk (DS)