UK Shrinks By Minus 0.6% As Global Economy To Slow Further

31st January 2023

The UK has sunk to the bottom of the league tables for growth of all the advance economies. A combination of brexit, covid and the Ukraine war have al contributed to the shrinking situation. Strikes will also being to come into later estimates of the numbers.

The global economy is poised to slow this year, before rebounding next year. Growth will remain weak by historical standards, as the fight against inflation and Russia's war in Ukraine weigh on activity.

Despite these headwinds, the outlook is less gloomy than in our October forecast, and could represent a turning point, with growth bottoming out and inflation declining.

Economic growth proved surprisingly resilient in the third quarter of last year, with strong labor markets, robust household consumption and business investment, and better-than-expected adaptation to the energy crisis in Europe. Inflation, too, showed improvement, with overall measures now decreasing in most countries—even if core inflation, which excludes more volatile energy and food prices, has yet to peak in many countries.

Elsewhere, China's sudden re-opening paves the way for a rapid rebound in activity. And global financial conditions have improved as inflation pressures started to abate. This, and a weakening of the US dollar from its November high, provided some modest relief to emerging and developing countries.

Accordingly, we have slightly increased our 2022 and 2023 growth forecasts. Global growth will slow from 3.4 percent in 2022 to 2.9 percent in 2023 then rebound to 3.1 percent in 2024.

The UK economy will shrink and perform worse than other advanced economies, including Russia, as the cost of living continues to hit households, the International Monetary Fund has said.

The IMF said the economy will contract by 0.6% in 2023, rather than grow slightly as previously predicted.

The UK economy will shrink and perform worse than other advanced economies, including Russia, as the cost of living continues to hit households, the International Monetary Fund has said.

The IMF said the economy will contract by 0.6% in 2023, rather than grow slightly as previously predicted.

If a country's economy shrinks, typically this means companies make less money and the number of people unemployed rises.

IMF chief economist Pierre-Olivier Gourinchas said last year, the UK had "one of the strongest growth numbers in Europe".

He said this year's forecast reflected the UK's "high dependence on liquid natural gas" and that employment was still below pre-pandemic levels.

Mr Gourinchas said the plans outlined by the Treasury in the months since the Autumn Statement showed the UK was "certainly trying to carefully navigate these different challenges and we think that they are on the right track".

The IMF expects the UK to grow in 2024, revising up its forecast to 0.9% from 0.6%.