IMF improves UK economic outlook

IMF improves UK economic outlook

The International Monetary Fund today improved its forecasts for the UK economy, which is recovering “more quickly than expected”, but warned of “difficult choices” on the horizon to stabilize public debt.

“With growth recovering faster than expected, the UK economy is headed for a soft landing after a moderate technical recession in 2023,” the IMF said in a report.

UK GDP is now expected to grow by 0.7 percent in 2024 as a whole, versus 0.5 percent in forecasts published in April.

According to official British data published in early May, the country recorded GDP growth of 0.6% in the first three months of the year.

After peaking at more than 11 per cent at the end of 2022, UK inflation fell “more rapidly than expected last year and is expected to return sustainably in early 2025” to the Bank of England’s 2 per cent target. International.

The International Monetary Fund expects GDP to grow by 1.5% in 2025, as lower inflation favors more flexible purchasing power and financial conditions.

A few months before the national election, in which his party is expected to lose to the opposition Labor Party, the Conservative Finance Minister, Jeremy Hunt, today welcomed a report that “clearly shows (…) that the British economy has recorded significant progress.” .

However, the IMF warned that “difficult choices will have to be made in the medium term to stabilize public debt, given the significant pressures on public services and critical investment needs.”

In particular, the Fund proposed increasing tax revenues, containing expenditures, and improving the efficiency of public services.

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Hunt, who has cut social security contributions twice in recent months, promised tax cuts on Friday if the Conservatives remain in power in the next parliament.

Today, the International Monetary Fund has advised against any further tax cuts unless they credibly boost growth and are adequately offset by prudent deficit-reduction measures.

The international organization advises “ambitious structural reforms”, while the UK’s long-term prospects remain penalized by “lower labor productivity and slightly higher than expected levels of inactivity due to long-term illness”.

British authorities must also “stay on track on climate policy,” according to the International Monetary Fund, which stresses that currently planned policies and spending will not be sufficient to achieve the country’s goals.

Photo: Bruno Felipe Pires

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