UK economy to fare worse than any other country in developed world this year, IMF forecasts
Britain’s economic reputation has been dealt a further blow after the International Monetary Fund (IMF) forecast that this year the UK economy will fare worse than any other country in the developed world – including Russia.
In the latest update of its economic forecasts, the IMF said that it expected the UK’s gross domestic product (GDP) to contract by 0.6% in 2023.
To add further humiliation for the chancellor and prime minister, even as Britain’s outlook was downgraded, most other countries around the world saw their forecasts upgraded.
But the Fund said that while the broader global economy was doing better than expected, with inflation having peaked and investment beginning to turn around, the UK economy would face a downgrade “reflecting tighter fiscal and monetary policies and financial conditions and still-high energy retail prices weighing on household budgets.”
The UK had previously been forecast to grow by 0.3% this year and 0.6% next year.
Now, said the Fund, it should expect -0.6% this year and 0.9% growth in 2024.
The comments are especially awkward for the Treasury, which has been criticised by some for its plans to raise taxes and reduce the budget deficit in coming years, resulting in an increase in costs for businesses and households, even as they continue to battle a cost of living crisis.
Up until recently, chancellor Jeremy Hunt had contextualised the UK’s relatively weak growth by pointing to the fact that the IMF’s recent forecasts projected that a third of countries were facing a recession.
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However, the Fund has now upgraded its growth projections for Italy and Germany, with the result that both will now grow more than the UK in 2023.
Indeed, Britain’s -0.6% GDP is the worst of any economy included in its latest forecast update, including Russia – which despite facing sanctions from most of the West is projected to grow by 0.3%.
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Mr Hunt said of the forecast: “The governor of the Bank of England recently said that any UK recession this year is likely to be shallower than previously predicted, however these figures confirm we are not immune to the pressures hitting nearly all advanced economies.
“Short-term challenges should not obscure our long-term prospects – the UK outperformed many forecasts last year, and if we stick to our plan to halve inflation, the UK is still predicted to grow faster than Germany and Japan over the coming years.”
The IMF said it now expected the global economy to expand by 2.9% in 2023.
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UK ‘could be in for first quarter contraction’
Although this is down from the 3.4% in 2022, it is nonetheless 0.2 percentage points faster than the Fund previously forecast in October.
It said: “Adverse risks have moderated since the October 2022 [World Economic Outlook].
“On the upside, a stronger boost from pent-up demand in numerous economies or a faster fall in inflation are plausible.
“On the downside, severe health outcomes in China could hold back the recovery, Russia’s war in Ukraine could escalate, and tighter global financing conditions could worsen debt distress.”
After China’s decision to open up its economy and ditch its zero-COVID policy, the Fund upgraded its GDP projection from 4.4% to 5.2% this year.
It said the US would grow by 1.4%, rather than its previous projection of 1%.
Germany, which was previously forecast to shrink by 0.3%, is now slated to grow by 0.1%.
Pakistan has launched attacks on “multiple targets” across India, according to the media wing of Pakistan’s military.
Pakistan said in a statement that retaliatory attacks are underway in response to what it called “continuous provocation” by India, which fired missiles at three air bases inside Pakistan.
“Multiple targets in this operation are being engaged all across India,” the statement from Pakistan Armed Forces (PAF) said.
Pakistan’s military said it used medium-range Fateh missiles to strike more than 25 military sites, including airbases and weapons depots in the Indian states of Gujarat, Punjab and Rajasthan, as well as locations in India-administered Kashmir.
Pakistan’s military posted footage on X showing missiles being fired from what appeared to be a mobile launcher.
Pic: MilitaryPakISPR
The AP news agency also said loud explosions have been heard in India-administered Kashmir, in the disputed region’s two big cities of Srinagar and Jammu, and the garrison town of Udhampur.
Meanwhile, an Indian military source told Reuters that India has launched air operations in Pakistan, although no further details were given.
The operations mark the latest escalation in a conflict between the two nuclear-armed rivals, triggered by a deadly attack last month in India-administered Kashmir.
Most of the 26 civilians killed were Hindu Indian tourists. India blames Pakistan for backing the assault, an accusation Islamabad rejects.
Pakistan’s Prime Minister Shehbaz Sharif has called a meeting of the National Command Authority, the body which takes security decisions, including those related to the country’s nuclear arsenal.
State-run Pakistan television said three air bases were struck by India on Friday, although Pakistan insisted most of the missiles had been intercepted.
Despite the military offensive, PAF also posted a message on X in what appeared to represent an opportunity to de-escalate the situation.
“Now that a response has been given we hope the neighbour [India] will move to dialogue and diplomacy like Civilized Nations,” it said.
In recent days, both countries have launched a series of missile and drone strikes, although the scale and impact have been consistently questioned by each other.
On Wednesday, India conducted airstrikes on several sites in Pakistani territory. Pakistan said it shot down five Indian fighter jets.
On Thursday, India claimed to have repelled drone and missile attacks at military targets in more than a dozen cities and towns, including Jammu in India-administered Kashmir. Meanwhile, India claimed it struck Pakistan’s air defence systems and radars close to the city of Lahore.
A damaged house in Jammu, in Indian-administered Kashmir, after a Pakistani drone attack. Pic: AP
The Indian army said on Friday that Pakistan fired about 300 to 400 drones, targeting military installations along the western borders – a claim strongly denied by Pakistan.
The G7 group of advanced economies, which includes Canada, France, Germany, Italy, Japan, the US and Britain, urged maximum restraint from both India and Pakistan.
“We call for immediate de-escalation and encourage both countries to engage in direct dialogue towards a peaceful outcome,” a statement issued on Friday said.
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World
European leaders to meet in Ukraine for ‘coalition of the willing’ talks – and issue call to Russia
Sir Keir Starmer will join other European leaders in Kyiv on Saturday for talks on the “coalition of the willing”.
The prime minister is attending the event alongside French President Emmanuel Macron, recently-elected German Chancellor Friedrich Merz and Polish Prime Minister Donald Tusk.
It will be the first time the leaders of the four countries will travel to Ukraine at the same time – on board a train to Kyiv – with their meeting hosted by President Volodymyr Zelenskyy.
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Sir Keir Starmer, Emmanuel Macron and Friedrich Merz travelling in the saloon car of a special train to Kiev. Pic: Reuters
Military officers from around 30 countries have been involved in drawing up plans for the coalition, which would provide a peacekeeping force in the event of a ceasefire being agreed between Russia and Ukraine.
Ahead of the meeting on Saturday, Sir Keir, Mr Macron, Mr Tusk and Mr Merz released a joint statement voicing support for Ukraine and calling on Russia to agree to a 30-day ceasefire.
Sir Keir and Volodymyr Zelenskyy during a meeting in March. Pic: AP
“We reiterate our backing for President Trump’s calls for a peace deal and call on Russia to stop obstructing efforts to secure an enduring peace,” they said.
“Alongside the US, we call on Russia to agree a full and unconditional 30-day ceasefire to create the space for talks on a just and lasting peace.”
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The leaders said they were “ready to support peace talks as soon as possible”.
But they warned that they would continue to “ratchet up pressure on Russia’s war machine” until Moscow agrees to a lasting ceasefire.
“We are clear the bloodshed must end, Russia must stop its illegal invasion, and Ukraine must be able to prosper as a safe, secure and sovereign nation within its internationally recognised borders for generations to come,” their statement added.
“We will continue to increase our support for Ukraine.”
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The European leaders are set to visit the Maidan, a central square in Ukraine’s capital where flags represent those who died in the war.
They are also expected to host a virtual meeting for other leaders in the “coalition of the willing” to update them on progress towards a peacekeeping force.
This force “would help regenerate Ukraine’s armed forces after any peace deal and strengthen confidence in any future peace”, according to Number 10.
World
Ten explosions near international airport in India-administered part of Kashmir, officials say
Ten explosions have been heard near Srinagar International Airport in India-administered parts of Kashmir, officials have told Reuters news agency.
The blasts followed blackouts caused by multiple projectiles, which were seen in the sky above the city of Jammu earlier on Friday.
Explosions were also heard in the Sikh holy city of Amritsar, in the neighbouring Punjab state, according to Reuters.
An Indian military official told the agency that “drones have been sighted” and “they are being engaged”.
It comes as tensions between India and Pakistan across the line of control around the region of Kashmir have boiled over this week, leading to fears of a wider conflict.
On Wednesday morning, India carried out missile strikes in Pakistan and Pakistan-administered parts of the disputed region.
The retaliation came weeks after 26 people, mainly Indian tourists, were shot dead by gunmen in an India-administered part of Kashmir last month.
The government in India said it hit nine “terrorist infrastructure” sites, while Pakistan said it was not involved in the April attack and the sites were not militant bases.
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Explained: India-Pakistan conflict
Around 48 people have been killed since Wednesday, according to casualty estimates on both sides – which have not been independently verified.
India also suspended its top cricket tournament, the Indian Premier League, as a result of rising tensions, while the Pakistan Super League moved the remainder of its season to the United Arab Emirates.
Meanwhile, White House press secretary Karoline Leavitt said at a conference on Friday that the US is in constant contact with both India and Pakistan.
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