The British economy will perform worst among the major industrialized nations, the International Monetary Fund has predicted. The UK will be the only G7 member to face a recession in 2023, falling behind the Russian economy, the IMF said in its World Economic Outlook update, published on Tuesday.
In its latest report, the IMF again sharply downgraded its forecast for the UK, predicting the economy will contract by 0.6% against the 0.3% growth expected last October. That places the expected performance even lower than sanctions-hit Russia, which is projected to expand by 0.3% after contracting 2.2% in 2022. A UK recession this year would be the first, excluding the pandemic, since the financial crisis in 2009.
Among the other G7 nations, the IMF’s 2023 GDP predictions show growth of 1.4% in the US, 0.1% in Germany, 0.7% in France, 0.6% in Italy, 1.8% in Japan and 1.5% in Canada.
The IMF stated that while the prospects for other G7 members had improved or remained unchanged since October, the forecast for the UK looks gloomier due to surging interest rates and rising taxes. This, along with the government’s spending restraint will exacerbate the cost-of-living crisis.
“Tighter fiscal and monetary policies and financial conditions and still-high energy retail prices weighing on household budgets” have eroded the country’s GDP, the IMF said.
Raging inflation, running above 10% and more than five times the Bank of England’s 2% target, has undermined household spending power, squeezing demand and dragging down the economy, the report concluded.
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