The year 2022 has brought serious economic troubles for the European continent. The forced lockdowns because of the global pandemic followed by the war between Russia and Ukraine severely restricted the economical development in the region. The war also disrupted the supply of oil and gas throughout Europe, thus pushing the European countries toward a serious energy crisis. The UK, being one of the leading countries in the world, suffered significantly during this economic fallout, resulting in a massive drop in the pound’s value in comparison to the US Dollar.
With the start of 2023, the UK government was expecting things to become much more subtle and for the country to recover from the economic troubles that it faced last year. But the International Monetary Fund has predicted that the UK will be facing even more tense economic problems as the UK population is still struggling with the rising cost of living. The IMF also said that the UK economy will shrink exclusively this year, making it the worst-performing country amongst the G7 nations. The G7 or the International Group of Seven includes Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. This means that the UK economy will perform worse than other European countries that are also part of the G7 such as Germany, France, and Italy.
While forecasting the shrinkage of the UK economy in the coming months, the IMF also said that the UK has found the right track to follow for the country to achieve economic stability and to expand its presence in coming years. The IMF published its World Economic Outlook update on Jan 30, 2023, where the agency forecasted that the global economy will shrink during this year because of ongoing economic struggles. However, the IMF also said that the global economy will grow in 2024. According to this report by the IMF, the UK’s GDP will possibly shrink by 0.3% this year. Following this, the IMF also said that the UK will be the only country out of all developed countries to experience a decline in economic growth this year. The IMF said that the reasons behind this decline are the inflation in the UK and its high energy prices. However, replying to the forecast from the IMF, Jeremy Hunt, the Chancellor of the UK, said that the country has managed to outperform many forecasts during 2022.
The International Monetary Fund overlooks the financial stability and monetary cooperation for around 190 countries that are members of the IMF. Hence, the forecasts from the IMF carry significant importance on the economic side of things. Pierre-Olivier Gourinchas, the Chief Economist for IMF, said that during 2022, the UK performed significantly strong, garnering 4.1% economic growth which was one of the highest growth. Although he further added, the forecast regarding the slowdown of the UK's economy is just as factual. He blamed the high inflation and rising energy prices that the people of the UK are facing. This is because the current inflation in the UK has forced the Bank of England to impose a stringent monetary policy, which is further estimated to affect mortgage payments.