The International Monetary Fund (IMF) has updated their recent forecasts and has said that the “UK economy is expected to avoid a recession” this year.
The IMF said that the UK will “maintain positive growth in 2023,” but growth remains “subdued” and they are forecasting growth of 0.4% for this year.
UK output is forecast in April to contract by 0.3% and the change reflects “higher-than-expected resilience” in supply and demand and there is improved confidence in reduced post-Brexit uncertainty.
Chancellor Jeremy Hunt said this shows a “big upgrade” for growth prospects which gives the government credit in “action to restore stability and tame inflation.”
“It praises our childcare reforms, the Windsor Framework and business investment incentives,” he added.
“If we stick to the plan, the IMF confirm our long-term growth prospects are stronger than in Germany, France and Italy – but the job is not done yet.”
The IMF said, “Growth is projected to rise gradually to 1% in 2024, as disinflation softens the hit to real incomes, and to average about 2% in 2025 and 2026, mainly on the back of a projected easing in monetary and financial conditions.”
They added, that in their view “monetary policy will need to remain tight to keep inflation expectations well-anchored and bring inflation back to target.
“Inflation is projected to return to the 2% target only by mid-2025, six months later than in staff’s April forecast, and risks to this trajectory are tilted to the upside.
Suggesting, that “further monetary tightening will likely be needed, and rates may have to remain high for longer to bring down inflation more assuredly.”