The International Monetary Fund has warned that Britain’s economy faces a deeper recession than previously forecasted, and also reports that Russia will record economic growth despite sanctions placed on the economy because of the Ukraine War.
The UK’s projected growth has been cut from 0.3% in 2023 and is now expected to contract 0.6% according to the IMF’s analysis.
The Fund points to tax hikes and higher interest rates in Britain, along with cuts to government spending, saying that “financial conditions and still-high energy retail prices” would also “weigh on household budgets”.
“Consumer confidence and business sentiment have worsened,” they said in the latest release in the IMF’s World Economic Outlook.
The Telegraph said the forecast would leave “the UK economy languishing behind Germany and even sanctions-hit Russia, with both countries expected to eke out modest growth this year.
Britain faces the most turbulent period of industrial unrest the country has seen for a decade as train workers, teachers, civil servants, nurses and others plan industrial action.
It is expected that the Bank of England will hike interest rates again on Thursday from 3.5pc to 4pc, with impacts on housing and borrowings.
The IMF adjusted its forecast for eurozone growth up slightly, saying it expected the area to see growth of 0.7%, up slightly from the 0.5% growth it had previously predicted for 2023.
However, the German economy, considered the manufacturing powerhouse of Europe, unexpectedly shrank in the fourth quarter of 2022, signalling a recession.
“There are a lot of risks, but our baseline (scenario) is for the euro area not to be in a recession this year,” Petya Koeva Brooks, Deputy Director in the IMF’s Research Department, told Euronews.
The IMF noted that Russia’s economy, despite a vast array of Western sanctions, is now expected to grow 0.3% in 2023, which is seen as a significant rally from the –2.3% contraction estimated by the fund in October.
The Fund’s analysis pointed to Russia “finding new clients” by redirecting trade “from sanctioning to non-sanctioning countries”, mostly outside the West.
But Brooks believes that the impact of Western sanctions would eventually start to bite. “The war is expected to have a very permanent and sizeable impact on the Russian economy,” she said.
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