Downing Street has insisted that the UK’s economy is strong despite the International Monetary Fund’s warning that Britain’s economy will go into reverse this year and will fare worse than all other advanced nations.
In its latest World Economic Outlook update, the IMF downgraded its UK gross domestic product (GDP) forecast once again, predicting a contraction of 0.6% against the 0.3% growth pencilled in last October.
The outlook for the year ahead puts the UK far behind its counterparts in the G7 group of advanced nations.
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The UK is also expected to be the only country – across advanced and emerging economies – to suffer a year of declining GDP.
But Rishi Sunak’s official spokesman told reporters that the IMF itself “said that UK economic policy is now on the right track” following a rocky autumn under Liz Truss’ premiership.
The former prime minister caused the economy to spiral after she announced a raft of unfunded tax cuts, which eventually led to her resignation after less than two months in office.
Mr Sunak’s spokesman added that the UK outperformed many forecasts last year and was “predicted to grow faster than Germany and Japan over the coming years”.
But shadow chancellor Rachel Reeves said the government needs to do “so much more” to fulfil the potential of the UK economy.
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Asking an urgent question on the IMF’s economic outlook update in the Commons, Ms Reeves said: “Britain has huge potential but 13 years of Tory failure has been a drag anchor on prosperity.
“Today’s IMF assessment holds a mirror up to the wasted opportunities and it is not a pretty sight.
“The UK is the only major economy forecast to shrink this year. Weaker growth compared to our competitors for both of the next two years.
“The world upgraded, Britain downgraded. Growth even worse than sanctions-hit Russia.”
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‘It’s bad news for UK economy’
Taking aim at Chancellor Jeremy Hunt who was not in attendance, she added: “If the chancellor had ideas, answers or courage, he would be here today. But he is not.”
Ms Reeves continued: “The question people are now asking is this: are me and my family better off after 13 years of Tory government? The answer is no. And as the IMF show today, it doesn’t have to be this way.”
A former adviser to Ms Truss continued to claim the ex-PM had taken the right approach to the economy, even saying the country’s finances would be in a better position had her plans been followed through.
Julian Jessop, who also used to be the chief economist at the Institute of Economic Affairs, told Sky News: “Some tax policies backfired but [Ms Truss’] overall strategy was right, and was welcomed at the time by a number of business organisations.
“We’re not the only major economy with a bad outlook – Spain too. The UK was hit harder by COVID than other economies, and by the energy crisis.”
He added: “I don’t think the hit from rising energy bills will be as big as people think. We need a change in policy to tackle these problems.”
Transport minister Richard Holden said IMF forecasts were wrong ‘in the last couple of years’
Earlier on Monday, transport minister Richard Holden disputed the IMF’s forecast.
Asked if the IMF is wrong, Mr Holden told Sky News: “I think so.”
He added that the IMF has got its forecasts wrong “in the last couple of years”, and that he thinks “Britain can outperform its prediction like it has done for the last two years”.
The Conservative minister told Kay Burley that the UK economy has “grown faster than Germany since 2016” and “grown faster than France, Italy, and Japan since 2010”.
Mr Holden also said the body’s report “praised” the actions Chancellor Jeremy Hunt and Prime Minister Rishi Sunak have taken to try to stabilise the country’s finances.
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Truss grilled over dire economic forecast
Former cabinet minister Jacob Rees-Mogg agreed with Mr Holden, telling Sky News his earlier remarks about the IMF were “sheer genius”.
“Well, first of all, this is a forecast,” Mr Rees-Mogg said.
“And when was the IMF forecast last right? So you’ve got to understand that forecasts are not historic fact.”
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Responding to the IMF’s latest economic outlook earlier on Tuesday, the chancellor said “these figures confirm we are not immune to the pressures hitting nearly all advanced economies”.
“Short-term challenges should not obscure our long-term prospects – the UK outperformed many forecasts last year, and if we stick to our plan to halve inflation, the UK is still predicted to grow faster than Germany and Japan over the coming years,” he said in a statement.