LONDON: The International Monetary Fund (IMF) cut its growth forecast for Britain for 2025 on Tuesday after increased estimates of the size of the economy in previous years left it with less catch-up potential than previously thought.
Britain’s economic prospects and the Conservative Party’s record during its time in office since 2010 are frequent topics of political debate with a national election expected in the second half of this year.
Overall the IMF forecasts - part of a broader global update - show British gross domestic product growth picking up from 0.5% in 2023 to 0.6% in 2024 and 1.6% in 2025, as falling energy prices lower inflation, boosting disposable incomes and allowing the Bank of England to cut rates in the second half of 2024.
The IMF’s latest estimate for 2025 is 0.4 percentage points below a previous estimate made in October, reflecting “reduced scope for growth to catch up in light of recent upward statistical revisions to the level of output through the pandemic period.”
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The growth in 2023 and 2024 remains weak by historic standards and only Germany, which was also hit hard by a surge in European gas prices after Russia invaded Ukraine in 2022, is expected to perform worse.
In 2025, British growth is forecast to be just below the average in both the euro zone and among advanced economies.
Official figures published on Sept. 29 - too late for inclusion in October’s IMF forecast - showed Britain’s economy in June 2023 was 1.8% larger than before the COVID-19 pandemic, not 0.2% smaller as calculated in mid-August.
In November, Britain’s Office for Budget Responsibility forecast 0.7% economic growth for 2024 and 1.4% for 2025.
Finance minister Jeremy Hunt welcomed the latest IMF forecast that growth would pick up, which he partly attributed to his recent cuts to business and employee taxation.
“It is too early to know whether further reductions in tax will be affordable … but we continue to believe that smart tax reductions can make a big difference in boosting growth,” he said.
The opposition Labour Party has highlighted the fall in living standards caused by recent high inflation as well as weak wage growth before the pandemic.
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