British government welcomes IMF's U-turn on forecast for UK economy

British government welcomes IMF's U-turn on forecast for UK economy

Global body now expects British economy to expand by 0.4%, in notable departure from previous prediction of 0.3% contraction

By Aysu Bicer

LONDON (AA) - In a surprising reversal, the International Monetary Fund on Tuesday revised its forecast for the UK economy, now projecting growth instead of a contraction, with the Treasury chief welcoming the news.

The global body is now expecting the British economy to expand by 0.4%, citing factors such as "higher-than-expected resilience,” reduced post-Brexit uncertainty, and lower energy prices, marking a notable departure from the IMF's previous prediction this April, which foresaw a 0.3% contraction.

The UK's Treasury chief Jeremy Hunt previously criticized the Fund for consistently underestimating the UK's economy, after it predicted that it would perform poorly this year.

In April, Chancellor of the Exchequer Hunt said the IMF had "undershot" in its predictions for the British economy "every year since 2016, bar one" but the fund was "just one of a number of forecasters."

"Buoyed by resilient demand in the context of declining energy prices, the UK economy is expected to avoid a recession and maintain positive growth in 2023," the IMF said in Tuesday's statement.

"Still, economic activity has slowed significantly from last year and inflation remains stubbornly high following the severe terms-of-trade shock due to Russia's war in Ukraine and, to some extent, labor supply scarring from the pandemic," it added.

Hunt this time welcomed the news, saying: "Today’s IMF report shows a big upgrade to the UK's growth forecast and credits our action to restore stability and tame inflation."

He further stressed that if the government continues to follow its plan, the IMF confirms that the country's long-term growth prospects are stronger than those of Germany, France, and Italy.

However, he also acknowledged that there is still work to be done.

According to the IMF, GDP is expected to grow 1% in 2024, unchanged from their previous projections.

The Bank of England also predicted that the UK economy would avoid recession this year, despite the country's annual inflation remaining above 10%, well above the 2% inflation target.


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