Financial News

  • 24 January 2013, 10:00

UK Economy: IMF Cuts Growth Forecast

The International Monetary Fund has cut its forecast for UK growth this year and the next, in the latest economic blow for Chancellor George Osborne.

The IMF cut its forecast for Britain's expansion next year by more than any other major economy apart from Japan, dealing a blow to those hoping for a quick rebound from the recent double-dip.

The news comes days ahead of the release of official gross domestic product (GDP) figures for the final quarter of last year, which analysts expect will show the UK slipping back into economic contraction.

The IMF said that Britain would grow by 1% this year - 0.1 percentage points lower than in its October forecast, and by 1.9% next year - a 0.3 percentage point cut compared with October.

The changes came in the IMF's update to its World Economic Outlook.

The IMF is now more pessimistic on UK growth than the official forecasts delivered by the Office for Budget Responsibility (OBR), which expects growth of 1.2% this year and 2% in 2014.

Although it cut its forecasts for most countries around the world by 0.1% this year and the next, it said that it was cautiously positive about the global economy's prospects.

It predicted that world GDP growth would be 3.5% this year and 4.1% next year.

But added that "global growth is projected to increase during 2013, as the factors underlying soft global activity are expected to subside".

It said that unless the eurozone crisis returned, or the United States faced a crisis associated with its debt ceiling, "global growth could be stronger than projected".

However, it added that policymakers "must urgently address these risks".

It said that it expects the US to grow by 2% this year and by 3% in 2014.

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