by David Milliken
LONDON (Reuters) – The International Monetary Fund (IMF) has raised its growth forecast for Britain’s economy, which is unlikely to experience a recession this year.
The Washington-based organization now forecasts growth of 0.4% in 2023, compared to a contraction of 0.3% expected a month ago.
The Fund said the improvement in its forecast reflected unexpected resilience in demand, thanks in part to faster wage growth, increased government spending and improved business confidence.
Lower energy costs and the re-establishment of supply chains also contributed to this revision.
“Growth prospects, although somewhat improved, remain subdued,” the IMF said. “Economic activity has slowed considerably compared to 2022 and inflation remains high due to the war in Ukraine and, to some extent, the impact of the pandemic on labor supply” .
Inflation is expected to fall to around 5% by the end of the year, from 10.1% in March, and to return to 2% by mid-2025, broadly in line with Bank of India forecasts. England (BoE).
Britain’s economy is expected to grow by 1% in 2024 and 2% the following two years, before returning to a long-term rate of around 1.5%, according to IMF forecasts.
The organization stressed that inflation and accompanying wage hikes are the biggest near-term threats to the UK’s economic outlook and that the BoE should ensure that monetary policy remains tight.
“That said, the high uncertainty about the macroeconomic outlook and the persistence of inflation warrant continued review of the pace and depth of monetary tightening,” the IMF added.
(David Milliken, Laetitia Volga, edited by Blandine Hénault)
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