The UK is set for the weakest growth in the G7 next year, according to new downgraded forecasts from the IMF, but the Government insisted the economy is set to rebound with inflation falling.
For this year, the International Monetary Fund marginally upgraded its growth prediction for UK gross domestic product (GDP) to 0.5 per cent, from 0.4 per cent before.
That would be the second weakest performance across the G7 club of advanced economies, behind Germany, according to the latest IMF forecasts.
But for 2024, it predicted Britain would fall to the bottom of the G7 rankings with growth of 0.6 per cent amid pressure from higher Bank of England interest rates. The IMF’s previous forecast for next year posited UK growth of 1.0 per cent.
After the pandemic and the war in Ukraine, IMF director of research Pierre-Olivier Gourinchas said: “The global economy is limping along, not sprinting.”
The global financial watchdog also predicted that the UK would see consumer price index inflation of 7.7 per cent for this year, sharply falling to 3.7 per cent next year - when Rishi Sunak is widely expected to call a General Election.
However, Chancellor Jeremy Hunt said the Government’s policies were working.
“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,” he said.
“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 Treasury said the IMF figures failed to take account of recent revisions from the Office for National Statistics, which showed UK GDP returned to its pre-pandemic level by the last three months of 2021, much earlier than first thought.
Officials said also that market expectations were now for a lower cost of borrowing from the Bank of England than foreseen in the IMF report, which should boost growth next year.
But Labour, which has been holding its annual conference this week, says the Tories have presided over economic calamity.
In his keynote conference speech later Wednesday, Sir Keir Starmer was set to say that a Labour victory next year would give the chance to “turn our backs on never-ending Tory decline with a decade of national renewal”.
Darren Jones MP, Labour’s shadow chief secretary to the Treasury, said the new IMF forecasts showed the need for a fundamental change of direction.
“Britain is still paying the price for the Conservatives’ disastrous mismanagement of the economy that is forecast to leave us with the lowest growth in the G7 and working people worse off,” he said.
“Rishi Sunak is too weak to take the tough decisions and Jeremy Hunt has no plan to repair the damage the Conservatives have done to our economy,” Mr Jones added, stressing that Labour’s growth plan would ”get Britain's future back.”
