According to the International Monetary Fund (IMF), Britain is projected to have the lowest economy growth among the G7 countries in 2024. Britons are expected to face five more years of high interest rates that contribute to price growth. The G7 countries include the United States, Japan, Germany, France, Italy, the United Kingdom, and Canada. The IMF’s latest projections place Britain at the bottom of the list.
The UK’s economy growth for next year has been estimated at 0.6 percent, which is lower than the previous projection of one percent. In comparison, Canada leads the group with a projected growth of 1.6 percent, followed by the United States with 1.5 percent. The IMF downgraded the UK’s growth prospects due to the impact of higher interest rates. The current bank rate is at 5.25 percent, which stopped climbing in September after nearly two years of increases.
High inflation resulting from the pressure of higher interest rates adversely affects the economy by driving up prices and financially burdening the population, particularly those struggling to pay off their mortgages and loans. The IMF attributed the decline in UK growth to tighter monetary policies aimed at curbing inflation and the lingering effects of high energy prices. The Bank of England (BoE) has indicated that the interest rate will remain steady for some time, but it has not yet reached its peak.
The IMF has predicted a peak bank rate of 6 percent in 2024 and expects it to remain above 4 percent until 2029. Even at 4 percent, the inflation rate will be significantly higher than the government’s target of 2 percent. Chancellor Jeremy Hunt acknowledged the IMF’s forecasts and highlighted the need to address inflation and unlock growth. He will deliver the Autumn Statement on Nov. 22 to address these concerns and reassure British households facing high borrowing costs for the next five years.
The government must also consider the political implications of the gloomy economic forecast as a general election looms. IMF Director of Research Pierre-Olivier Gourinchas described the perspective on the United Kingdom as one of “fairly subdued growth” with falling momentum and a cooling labor market. Mr. Gourinchas emphasized the persistent inflation and the need for tight monetary policy into the following year. The impact of the Israel-Gaza conflict on the global economy is uncertain and requires further assessment.
The IMF estimated global GDP to rise by 3 percent this year and 2.9 percent in 2024, which remains below historical levels. Mr. Gourinchas stated that the global economy is recovering slowly and unevenly, with advanced economies experiencing a more pronounced slowdown compared to emerging markets and developing economies.
Mr. Hunt called for party members to have faith in the British economy and pledged to prove the doubters wrong. Details on the government’s economic policies to achieve this will be provided in November’s statement. Shadow Chancellor Rachel Reeves has also expressed her commitment to restoring economic growth in Britain. However, she faced criticism from Mr. Hunt for not addressing inflation, which he considers the biggest issue for the economy.