The economic news for Britain continues to cause concern. The International Monetary Fund (IMF) has just forecast that British economic growth will slow sharply to the weakest of any major economy next year. And while this was in a broader downgrade to the world’s growth prospects after Russia’s invasion of Ukraine, it does not bode well for Boris Johnson’s government.
The IMF cut its forecast for British gross domestic product growth this year to 3.7% from January’s forecast of 4.7%, while for 2023 the growth rate was almost halved to 1.2% from 2.3%.
Cuts like these will feel like the country is in a recession even if technically the economy is still growing.
“Consumption is projected to be weaker than expected as inflation erodes real disposable income, while tighter financial conditions are expected to cool investment,” the IMF said.
Only last month, the Office for Budget Responsibility (OBR) cut its 2022 growth forecast to 3.8% and reduced its 2023 forecast to 1.8%.
As well as being the weakest growth of any country in the Group of Seven (G7) next year, the OBR pointed out that the scale of the downgrade is also larger than for any other G7 economy.
The IMF also forecasted that inflation in Britain would stay higher than in any big advanced economy, dropping to 5.3% in 2023 from 7.4% this year, compared with falls to 2.9% in the United States and 2.3% in the eurozone.
Labour shortages have predominantly come from older workers who have dropped out of the world place since the pandemic the IMF added.
The IMF also gave governments advice that they should offer support for households facing big price increases as the cost of living crisis bites, but that it should be focused on poorer households more than anything.