IMF says UK no longer heading for a recession in 2023

THE International Monetary Fund (IMF) said on Tuesday (May 23) that it no longer expects Britain’s economy will fall into a recession this year, upgrading forecasts that it published last month, but it also warned that the outlook remains subdued.

The IMF said British gross domestic product was set to grow by 0.4 per cent in 2023. In April, it forecast a contraction of 0.3 per cent.

The Fund said the improved outlook reflected the unexpected resilience of demand, helped in part by faster than usual pay growth, the fall in soaring energy costs, improved business confidence and the normalisation of global supply chains.

“Declining energy prices and widening economic slack are expected to substantially reduce inflation to around 5 per cent y/y by end-2023, and below the 2 per cent target by mid-2025,” the IMF said.

The IMF forecast economic growth of 1 per cent in 2024 and 2 per cent in 2025 and 2026 before settling back to a long-run rate of around 1.5 per cent.

Greater persistence in inflation and accompanying unsustainable increases in wages were the biggest threat to Britain’s economic outlook, the IMF added.

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The Bank of England would need to ensure monetary policy remained tight, the IMF said.

“This said, elevated uncertainty about the macroeconomic outlook and inflation persistence merits continuous review of the pace and magnitude of monetary tightening,” it added. REUTERS