Attributed the downbeat outlook to rising inflation and weak pound
The International Monetary Fund (IMF) has released a positive report on all major economies aside from the UK, which is now predicted to grow more slowly than the Euro Area amid Brexit uncertainty.
Explaining this in its latest World Economic Outlook, IMF stated: “Growth in most of the other advanced economies, with the notable exception of the United Kingdom, picked up in the first half of 2017 from its pace in the second half of 2016, with both domestic and external demand contributing.”
The organisation further said that it expects the growth rate in the UK to reduce to 1.7% in 2017 (from 1.8% in 2016) and slow even further in 2018 to 1.5%.
The Washington-based organisation has attributed the slowdown in growth to a drop in private consumption amid the pound’s post-Brexit collapse: “The medium-term growth outlook is highly uncertain and will depend in part on the new economic relationship with the EU and the extent of the increase in barriers to trade, migration, and cross-border financial activity.”
The US also suffered a cut to growth projections this year, but received an upgrade in the October report that nullified the move. “In the United States, weakness in consumption in the first quarter turned out to be temporary, while business investment continued to strengthen, partly reflecting a recovery in the energy sector,” the organisation stated.
Talking about the report, Labour shadow chancellor John McDonnell said: “The IMF report out today is yet another blow to the Chancellor’s already crumbling economic credibility – it is no wonder many of his fellow colleagues in his own party are calling for him to be sacked.”
Britain is also the exception when it comes to inflation. According to the IMF, many advanced economies like Australia, Canada, Denmark, South Korea are experiencing weak inflation but the UK has seen higher consumer prices due to the depreciation in sterling in the recent months.