UK economy set for weakest growth in G7 next year as IMF cuts its forecasts

Higher interest rates to stay as global economy ‘limping along’

Labour’s shadow Treasury secretary said ‘Britain is still paying the price for the Conservatives’ disastrous mismanagement of the economy’ (PA)

Britain will see sustained higher interest rates and the weakest economic growth across the G7 next year, according to the International Monetary Fund (IMF).

In a blow to Rishi Sunak’s government facing a looming general election, the IMF marginally upgraded its growth prediction for UK gross domestic product (GDP) this year to 0.5 per cent, from 0.4 per cent – but downgraded its forecasts for 2024 from 1 per cent to 0.6 per cent.

This would represent the worst growth rate across all of the G7, while Canada is expected to have the strongest growth, at 1.6 per cent.

In its latest economic outlook, the IMF said the global economy is “limping along” amid pressure from persistent inflation and higher borrowing costs.

Darren Jones, Labour’s shadow Treasury secretary, said: “Britain is still paying the price for the Conservatives’ disastrous mismanagement of the economy that is forecast to leave us with the lowest growth in the G7 and working people worse off.

“Rishi Sunak is too weak to take the tough decisions and Jeremy Hunt has no plan to repair the damage the Conservatives have done to our economy.

“At this week’s party conference in Liverpool, Labour has set out a serious plan to boost growth, make working people better off and get Britain’s future back.”

But Mr Hunt, chancellor of the Exchequer, played down the IMF’s downgrade. He said: “The IMF has upgraded growth for this year and downgraded it for next – but longer term they say our growth will be higher than France, Germany or Italy.

“To get there we need to deal with inflation and do more to unlock growth – which I will be focusing on in the upcoming autumn statement.”

Global GDP is expected to rise by 3 per cent this year and 2.9 per cent next year, according to the latest forecast.

The prediction for 2023 was held the same against the organisation’s previous prediction in July, while its forecast for 2024 saw a 0.1 percentage point decline.

IMF director of research, Pierre-Olivier Gourinchas, said: “The global economy continues to recover from the pandemic, Russia’s invasion of Ukraine and the cost of living crisis. In retrospect, the resilience has been remarkable.

“Despite war-disrupted energy and food markets and unprecedented monetary tightening to combat decades-high inflation, economic activity has slowed but not stalled.

“Even so, growth remains slow and uneven, with widening divergences. The global economy is limping along, not sprinting.”

The IMF also predicted that the UK would see consumer price index (CPI) inflation of 7.7 per cent for the current year, with this set to slow more sharply to 3.7 per cent next year.