LONDON — The International Monetary Fund said Tuesday that it expects the U.K. to avoid entering a recession and "maintain positive growth" in 2023.
The Fund said resilient demand in the context of declining energy prices had encouraged the positive, if "subdued" outlook.
The United Nations financial agency noted that British economic activity had seen a significant slowdown, compared to last year, and that inflation, which is currently at 10.1%, remains "stubbornly high." The U.K. economy continues to feel the impact of Russia's full-scale invasion of Ukraine, along with lingering supply scarring from the Covid-19 pandemic.
British Finance Minister Jeremy Hunt on Tuesday said that "the job is not done yet" on tackling inflation and improving Britain's growth prospects. He highlighted that high inflation and high energy costs were challenges for the U.K. and internationally.
"We're working every day to grow our economy and deliver on this and the other government priorities, and the IMF say we are doing just that," Hunt said at an IMF press conference.
In its report, the IMF said that the U.K. had weathered the recent global banking stresses well, alluding to the recent collapse of Credit Suisse and to turmoil in the sector in the U.S.
'Global public good'
The agency report described the U.K. continued financial stability as a "global public good" and recommended evidence-based reforms for London that address the post-pandemic rise in labor inactivity, regulation uncertainty around business investment, and accelerating the country's green transition.
The Tuesday note provided a more positive development for the U.K. than did the agency's World Economic Outlook of April. The previous month's forecast suggested that U.K. growth would shrink by 0.3% in 2023, making it the worst performer in the G20 group. The latest release suggests U.K. growth will now reach 0.4% this year — a 0.7 percentage point upgrade from the previous projection.
The IMF maintains that U.K. GDP will likely grow by 1% in 2024, and then by around 2% in 2025 and 2026.
Although somewhat downbeat, recent reports are more temperate than the IMF statement of September, when the organization suggested that fresh measures laid out by the newly-elected British government would "likely increase inequality." Many of those economic measures were then scrapped, with then-Prime Minister Liz Truss leaving the role within 44 days of taking office.