UK To Be Worst-Performing Economy In G7, IMF Warns

Britain is on course for the worst economic performance of any country in the G7, the International Monetary Fund (IMF) has predicted, as it warned of more turmoil in a “fragile” global financial system.

- ALASTAIR JAMIESON, JON STONE, ARCHIE MITCHELL

The UK’s output is expected to contract by 0.3 per cent this year before rebounding to grow by 1 per cent next year, IMF economists said.

The prediction puts Britain firmly at the bottom of the G7 group of economically advanced nations. It is the only country except Germany that is forecast to see a decline, while many non-G7 countries, including emerging and developing nations, are “already powering ahead”.

The fallout from Brexit, exacerbated by the economic missteps of former prime minister Liz Truss, has been blamed for Britain’s especially poor performance. Paul Johnson, from the Institute of Fiscal Studies (IMF), said Brexit was “clearly a big issue”.

The IMF also trimmed its worldwide growth outlook for this year, warning that factors such as stubbornly high inflation and disruption within the financial sector could slash output to near recession levels. “With the recent increase in financial market volatility, the fog around the world economic outlook has thickened,” it said. “Uncertainty is high and the balance of risks has shifted firmly to the downside so long as the financial sector remains unsettled.”

It singled out the UK and parts of Europe as being likely to face an economic struggle over the coming years. “Notably, emerging market and developing economies are already powering ahead in many cases, with growth rates jumping from 2.8 per cent in 2022 to 4.5 per cent this year,” the IMF said.

In 2024, Britain will finally see its output rise to 1 per cent, which puts the country level with Japan but slightly ahead of Italy. Inflation is expected to fall from 9.1 per cent last year to 6.8 per cent this year, and further to 3 per cent in 2024, according to the analysis.