According to the International Monetary Fund (IMF), this year’s growth in the UK will be curbed by the epidemic of the Omicron variant of the coronavirus and the turmoil caused by the ongoing supply chain crisis.
In the latest update of the global economic outlook, the IMF has downgraded the UK’s growth forecast for 2022 from the 5% forecast in October to 4.7%.
He also warned that rising inflation would last longer than originally expected, while the twin threats also hit economies around the world, lowering global growth prospects for 2022 from 4.9% to 4.4%. I did.
The IMF states:
“The news of the Omicron variant led to movement restrictions and increased volatility in financial markets at the end of 2021.
“Supply disruptions continue to weigh on activities.
“In the meantime, inflation is higher than expected and more widespread.”
The UK downgrade occurred after a significant recovery in 2021, and the IMF predicts that gross domestic product (GDP) has increased by 7.2% from 7% in October last year.
This is despite the declining workforce and the sector suffering from the absence of staff, despite the impact of Omicron in the last few weeks of December.
This was added to the shortage of workers, goods and materials caused by supply chain difficulties that occurred in the summer.
However, the IMF has upgraded its UK 2023 forecast from 1.9% in the October report to 2.3%.
In addition to concerns about the growing cost crisis, the IMF currently predicts that inflation will not subside until 2023, averaging 3.9% in developed countries around the world and 5.9 in emerging and developing countries in 2022. %.
“Inflation is expected to continue to rise longer than expected in October’s WEO (Global Economic Outlook), and supply chain turmoil and rising energy prices will continue in 2022,” the IMF said. ..
“Inflation should gradually decline as the supply-demand imbalance disappears in 2022 and monetary policy in major economies responds,” he added.
Washington-based groups have warned of threats to fiscal stability as central banks have begun raising interest rates globally to combat high inflation.
He said there could be “abrupt price changes in risk in the market” that could hurt vulnerable sectors.
The Bank of England is expected to raise UK interest rates from 0.1% to 0.25% last month and again in February to curb inflation spikes.
“Effective monetary policy communication is an important tool for avoiding inducing overreaction from financial markets,” the IMF emphasized.
The IMF called on the central bank to clearly show that interest rates could be eased again if the pandemic worsens.
International cooperation is also “essential to minimizing stress,” as interest rates have risen from record lows.
The IMF also noted the need for a “much larger coordinated global policy” for climate change to achieve the new goals presented at the recent Cop26 conference in Glasgow.
“Investing in climate policy remains essential to reduce the risk of catastrophic climate change,” he said.