The IMF no longer expects the UK to enter a recession in 2023

Madrid, May 23. (European Press) –

The UK economy, Europe's second-largest, will avoid falling into recession this year, according to new forecasts from the International Monetary Fund, which now expects GDP to expand by 0.4%, compared to a contraction of 0. . 3% was previously expected.

“Driven by resilient demand in the context of low energy prices, the UK economy is expected to avoid recession and maintain positive growth in 2023,” IMF experts concluded at the end of their mission in the country to prepare the annual “Article IV”. a report.

In this way, IMF technicians expect growth to slow to 0.4% in 2023, due to the tighter monetary and fiscal policies needed to stop inflation, which would mean an improvement of seven-tenths of the previous forecast that expected a contraction of 0.3%.

In this regard, they point out that the change in expectations reflects greater-than-expected resilience in both demand, including higher wages to keep pace with inflation, a less contractionary fiscal stance in 2023 and increased confidence, as well as in supply due to lower capacity. Costs and consolidation of global supply chains.

Looking to 2024, the IMF expects the UK economy to grow gradually as the impact of inflation on real income moderates, with an expansion of 1% in 2024 and average growth of around 2% in 2025 and 2026, primarily due to… Expected growth. – Facilitating monetary and financial conditions.

Likewise, lower energy prices and a deepening economic recession are expected to significantly reduce inflation to around 5% per year by the end of 2023; And less than the 2% target by mid-2025.

In this sense, the IMF believes that further monetary adjustment is necessary, stressing that interest rates may need to remain high for a longer period to reduce inflation more safely.

The institution notes that “the Bank of England should continue to focus on core measures of inflation, such as wage growth and services inflation.”