The International Monetary Fund (IMF) has raised its growth forecast for the UK, with projections suggesting that the UK economy will “accelerate”. This year’s forecasted growth has increased from 0.7% to 1.1%, showing that the country is in a better position than previously thought. Although this growth is still less than previous periods, it would put the UK in the middle of the pack of global nations. The IMF’s optimism comes despite the Chancellor, Rachel Reeves, claiming that Labour has inherited the “worst set of circumstances since the Second World War” after 14 years of Conservative rule.
Next week, in the Budget discussions, the Chancellor is expected to announce tax rises and spending cuts aimed at raising £40bn. However, as Reeves admitted, there is still a lot of work that needs to be done. Previous economic forecasts haven’t always come to fruition, and disagreements between the government and the IMF have been seen in previous predictions. Nevertheless, the IMF’s confidence in the country’s projected growth appears to be relatively high. The IMF shows global forecasts that the world economy has made a recovery, with a rise in the growth of richer countries despite the pandemic.
The US has managed to outperform many of its counterparts, with the IMF forecasting 2.8% growth this year and 2.2% growth next year. However, Europe’s major economies, especially Germany, are still in a sluggish position economically. Still, Spain’s economy looks set to grow rapidly this year and next. Reeves has inherited the Conservative plans for a cut to public investment as a share of the national economy. However, the IMF recommends an increase in public investment to boost productivity and competitiveness.
Finally, Russia’s sanctions-hit economy has had a notable forecast upgrade with its move to a war economy supporting growth to 3.6%. But as private consumption and investment slowed, next year growth is expected to be only 1.3%. The IMF voiced concerns about emerging economies which have been left with more “permanent scars” and more persistent inflation from recent global crises.
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