IMF says UK economy will grow more slowly in 2022

Boom for Brexit Britain: IMF says UK economy will grow more slowly in 2022 because of Omicron but it will STILL be fastest in G7

  • IMF expects British gross domestic product to expand by 4.7 per cent in 2022
  • This figure represents a 0.3 per cent decline from their prediction in October ’21 
  • But a predicted 4.7 per cent growth is still more than any other G7 country 
  • IMF did warn however that Britain faces economic hardships in months to come
  • IMF deputy managing director Gita Gopinath said that the Government should consider offering more financial support to vulnerable households

The growth of the UK economy will slow down in 2022 as a result of Omicron – but will still be the fastest growing economy of all the G7 countries, according to the International Monetary Fund (IMF).

In the latest amendment to its economic forecasts, the IMF today said it now expects British gross domestic product (GDP) to expand by 4.7 per cent in 2022 – cutting down its previous prediction of 5.0 per cent made in October 2021.

But the cut to Britain’s expected growth rate in 2022 was the smallest among the Group of Seven (G7) large advanced economies besides Japan, and Britain’s GDP is still expected to grow faster than any other G7 nation in 2022.

British GDP is also expected to outstrip global economic growth by 0.3 percent in 2022, thanks to a rebound from sharp economic decline the UK suffered amid the lockdowns in 2020.

The IMF also raised its October 2021 prediction of UK economic growth for the year 2023 by 0.4 per cent.

But the international financial institution warned that Britain is still set to face economic hardships as a result of disruption caused by the pandemic and the ongoing energy crisis. 

‘In the United Kingdom, disruptions related to Omicron and supply constraints – particularly in labour and energy markets – mean that growth is revised down,’ the IMF said.

The growth of the UK economy will slow down in 2022 as a result of Omicron – but will still be the fastest growing economy of all the G7 countries, according to the International Monetary Fund (IMF)

In the latest amendment to its economic forecasts, the IMF today said it now expects British gross domestic product (GDP) to expand by 4.7 per cent in 2022 – cutting down its previous prediction of 5.0 per cent made in October 2021

IMF deputy managing director Gita Gopinath said that the Government should consider offering more financial support to low-income households, who she believes would be most vulnerable to upcoming price rises amid the cost of living crisis. ‘Well-targeted support is important. This should be well-targeted support to highly vulnerable households who are having to face very high cost increases. That would be useful,’ she said

The IMF’s decision to trim down Britain’s economic forecast comes as most British households face big increases in their domestic energy bills in April, when regulated tariffs are due to rise by around 50 per cent. 

Broader consumer price inflation meanwhile is on track to hit its highest in 30 years, which has led anti-poverty campaigners to urge the government to expand the limited assistance given to poor households towards their energy bills.

IMF deputy managing director Gita Gopinath also said that the Government should consider offering more financial support to low-income households, who she believes would be most vulnerable to upcoming price rises amid the cost of living crisis.

‘Well-targeted support is important. This should be well-targeted support to highly vulnerable households who are having to face very high cost increases. That would be useful,’ she said in a news conference today.

Rising inflation also means the Bank of England is on course to raise interest rates next week for the second time in less than two months, after wrong-footing markets by holding off from a widely expected rate rise in November.

Gopinath said it was important for all central banks to communicate clearly and avoid unnecessary market volatility.

‘Several central banks have already begun raising interest rates to get ahead of price pressures. It is key to communicate well the policy transition towards a tightening stance to ensure orderly market reaction,’ she said.

The IMF also raised its October 2021 prediction of UK economic growth for the year 2023 by 0.4 per cent, from 1.9 – 2.3. But other G7 economies are expected to grow faster than the UK next year

Rising inflation also means the Bank of England is on course to raise interest rates next week for the second time in less than two months, after wrong-footing markets by holding off from a widely expected rate rise in November

It comes as Prime Minister Boris Johnson and Chancellor Rishi Sunak face mounting pressure over a planned national insurance hike in April, something which Johnson’s former Brexit minister Lord Frost himself has criticised as ‘unnecessary and unjustified’. 

Given the new pressures on energy prices and inflation, it’s even more important now to scrap these tax increases and focus on getting the economy growing again. Allowing people to keep more of their own money is always the best way,’ Lord Frost said on Monday.

Britain’s leading economic think-tank echoed Lord Frost’s sentiments, delaying the national insurance hike to ease the cost of living crisis was affordable. 

The Institute for Fiscal Studies believes there is ‘headroom’ to hold off for at least a year without a major impact on plans to boost funding for health and social care.

Prime Minister Boris Johnson and Chancellor Rishi Sunak face mounting pressure over a planned national insurance hike in April, something which Johnson’s former Brexit minister Lord Frost himself has criticised as ‘unnecessary and unjustified’ (stock pic) 

Business leaders have warned that millions of households face a double blow from the move announced in September.

This is because many firms will be forced to lift prices to cover the cost of having to pay higher NICs for their employees. As a result, families will face both higher personal taxes and paying more in the shops.

In a television interview on Monday, Boris Johnson appeared to leave the door ajar to a delay by refusing eight times to explicitly commit to going ahead in April.

He merely said: ‘What I’m telling people is that if you want to fund our fantastic NHS, we have to pay for it. And this Government is determined to do so.’

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