By David Milliken
LONDON -The International Monetary Fund cut its forecast for British economic growth this year due to disruption from the Omicron variant of the coronavirus, labour shortages and high energy prices, but raised its estimate for growth in 2023.
The IMF said it now expected British gross domestic product would expand by 4.7% in 2022 and by 2.3% in 2023, compared with its previous forecasts – made in October – of 5.0% and 1.9%.
The new forecasts came in a quarterly update of the IMF’s World Economic Outlook https://www.imf.org/-/media/Files/Publications/WEO/2022/Update/January/English/text.ashx. The cut to Britain’s expected growth rate in 2022 was the smallest among the Group of Seven (G7) large advanced economies, with the exception of Japan.
“In the United Kingdom, disruptions related to Omicron and supply constraints – particularly in labour and energy markets – mean that growth is revised down,” the IMF said.
Most British households will face big increases in their domestic energy bills in April when regulated tariffs are due to rise by around 50% and broader consumer price inflation is on track to hit its highest in 30 years.
Anti-poverty campaigners have urged the government to expand the limited assistance given to poor households towards their energy bills – something that would cost between 2.5 billion and 7.3 billion pounds ($3.4-9.8 billion) depending on scope.
Asked about this at a news conference, IMF deputy managing director Gita Gopinath said more help would be beneficial but it needed to be focused on those most in need.
“Well-targeted support is important. This should be well-targeted support to highly vulnerable households who are having to face very high cost increases. That would be useful,” she said.
Rising inflation also means the Bank of England is on course to raise interest rates next week for the second time in less than two months, after wrong-footing markets by holding off from a widely expected rate rise in November.
Gopinath said it was important for all central banks to communicate clearly and avoid unnecessary market volatility.
“Several central banks have already begun raising interest rates to get ahead of price pressures. It is key to communicate well the policy transition towards a tightening stance to ensure orderly market reaction,” she said.