IMF says it no longer expects UK recession this year

IMF says it no longer expects UK recession this year

The UK will escape a recession this yr, the IMF stated on Tuesday, including that the nation’s economic system had been “buoyed by resilient demand within the context of declining vitality costs”.

However the fund cautioned that Britain risked being caught with persistent inflation until rates of interest stayed excessive for longer.

“Financial exercise has slowed considerably from final yr and inflation stays stubbornly excessive,” the fund stated, including that “the outlook for development, whereas bettering considerably in latest months, stays subdued”.

The IMF predicted earlier this yr that the UK economic system would shrink by 0.5 per cent between the ultimate quarter of 2022 and the ultimate quarter of this yr.

However, in a big improve, it stated the economic system was now set to broaden 0.4 per cent in 2023, reflecting stronger wage development, extra supportive fiscal coverage and a sooner easing within the international pressures of vitality costs and provide chain blockages.

It expects gross home product to develop 1 per cent in 2024 and to common 2 per cent in 2025 and 2026.

However the IMF warned inflation was now set to stay above the Financial institution of England’s 2 per cent goal for six months longer than it had forecast final month, till mid-2025.

“Some additional financial tightening will most likely be wanted and charges could have to stay increased for longer,” it stated.

The fund warned towards “untimely celebrations”, with the chance that prime vitality costs would get replaced by extra persistent value and wage pressures that would lead inflation to “plateau” at an elevated price.

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