Under pressure: IMF boss Kristalina Georgieva
The International Monetary Fund (IMF) will this week come under pressure to revise its gloomy forecasts for the UK.
Figures showing the economy stormed back to growth at the start of the year has put the squeeze on the Washington-based institution to amend its data.
Officials from the IMF have been in Britain this month compiling their latest regular health check of the economy and will present their findings on Tuesday.
The IMF’s latest forecast in April suggested that UK gross domestic product (GDP) would grow by just 0.5 per cent this year.
Yet the most recent official figures show Britain grew by 0.6 per cent in the first quarter alone – bouncing back after a dismal end to last year when it slid into recession.
IMF staff have this month been meeting officials from the Treasury and the Bank of England as well as other experts, including the Institute for Fiscal Studies, a leading think-tank.
Its conclusions will be revealed by managing director Kristalina Georgieva at a press conference alongside Chancellor Jeremy Hunt.
The mood between them may have proved frosty after the IMF recently warned that Hunt’s cuts to national insurance could push up debt. The IMF has previously said the Government should be spending more money on the NHS and the transition to net zero instead.
But an upgrade for the UK is likely to be cheered by the Chancellor as the latest evidence that Britain has turned the corner. In addition to the bumper GDP figures, optimism has been boosted by the steep fall in inflation, which at the start of last year was running in double figures.
This week data is expected to show it plunging close to its two per cent target for the first time in nearly three years.
That should mean interest rate cuts are coming this summer. The Bank of England has said a cut could come as soon as June, providing relief for borrowers.
The upbeat signs for the economy have already prompted a number of forecasters to bump up their 2024 economic outlooks.
Deutsche Bank, Pantheon Macroeconomics and Capital Economics all expect UK GDP to grow by 0.8 per cent this year.
Panmure Gordon’s chief economist Simon French, who had an upbeat view on the UK even before the first quarter data, said he feels ‘more confident that I am the right side of the argument now’.
He expects growth of 1.2 per cent this year.
Sam Miley, managing economist at the Centre for Economics and Business Research (CEBR), said: ‘We think the IMF’s forecast is a pessimistic one.’
The CEBR predicts growth of one per cent as consumer spending is buoyed by falling inflation and buoyant wages. Miley added that other challenges facing the economy ‘are also expected to subside this year’ including cuts to interest rates within the next few months.