The International Monetary Fund (IMF) has forecasted that the UK economy is in for grim news by 2023, estimating a shrinkage of 0.3%. This projection is fall short of Chancellor Jeremy Hunt’s ambitions to raise the UK’s standing in the global league.
Despite Hunt’s efforts to bring some respite to the UK economy by implementing new fiscal rules and strategies, the IMF’s World Economic Outlook report has downgraded its forecast of a 0.6% contraction in January to 0.3%. It also expects that the Chancellor’s two main fiscal rules, reducing public debt burden and borrowing below 3% of Gross Domestic Product, will go unmet by 2028.
Among the advanced nations, only Germany is likely to perform worse than the UK, expecting a 0.1% dip in output this year. However, the IMF’s outlook for several smaller European countries that were positively impacted due to the rise in gas prices at the end of 2022, such as Sweden, Czech Republic and Estonia, are comparatively brighter.
At the IMF gatherings this week in Washington, DC, Chancellor Hunt will be quick to remind his peers of his commitment to rebut the views of ‘declinists’, highlighting his ambitions for a thriving UK economy. Pierre-Olivier Gourinchas, the IMF’s chief economist, believes the ‘slowdown is concentrated’ in the UK and the eurozone.
Furthermore, the forecasts of the IMF do not bode well with those drawn up by the Office for Budget Responsibility (OBR). Despite expecting a modest growth of 1% in 2024 and 1.5% by 2028, their figures show a deficit of 3.7% of GDP which is much higher than the OBR’s 1.7% prediction. Such a stark difference will mean that Hunt’s borrowing target of 3% of gross domestic product won’t be met either.
Regarding the two people mentioned in the article, Chancellor Jeremy Hunt has been at the helm of the UK Government for over 6 years and is aiming to bring about a revival in the UK economy by adhering to a set of fiscal rules. Pierre-Olivier Gourinchas is the Chief Economist of the IMF and has noted that the ‘slowdown is concentrated’ in the UK and the eurozone.
The IMF is an organisation of 189 countries that works towards the goal of global economic stability and makes recommendations on important issues that affect the global economy. Specifically, the IMF’s World Economic Outlook report offers economic forecasts for different countries and regions around the world.