IMF says it no longer expects recession in UK this year

The IMF said on Tuesday that Britain would avoid recession this year, adding that the country’s economy was “encouraged by resilient demand in the context of falling energy prices”.

But the fund cautioned that unless interest rates remain high for a long time, Britain risks being stuck with persistent inflation.

“Economic activity has slowed significantly since last year and inflation remains very high,” the fund said, adding that “the outlook for growth remains weak despite some recovery in recent months”.

The IMF predicted earlier this year that the UK economy would shrink by 0.5 per cent between the last quarter of 2022 and the last quarter of this year.

But, in a significant upgrade, it said the economy is now set to expand 0.4 percent in 2023, reflecting stronger wage growth, more supportive fiscal policy and a rapid easing of global pressures from energy prices and supply chain disruptions. Is.

It expects GDP to grow by 1 percent in 2024 and an average of 2 percent in 2025 and 2026.

But the IMF warned that inflation is now set to remain above the Bank of England’s 2 per cent target for six months, up to mid-2025 from last month’s forecast.

It added, ‘Some more monetary tightening will be needed and rates may have to remain high for a long time.’

The Fund warned against “premature celebration”, with the risk that higher energy prices would be replaced by more persistent price and wage pressures that could lead inflation to “plateau” at a higher rate.