The International Monetary Fund has warned that the coronavirus crisis will cause more long-term damage to the UK economy than any other G7 country.
The fund said on Tuesday that its global forecast showed that while most developed countries would return to the economic growth expected before the pandemic, the UK economy would remain 3% smaller in 2024.
These major scars on the British economy, offset by forecasts from the Institute for Fiscal Studies and Citigroup in recent days, will force Rishi Sunak to use new taxes to pay for the pandemic’s legacy rather than health and social reform. Care. .
The IMF also predicted that the chancellor would enter this month’s budget without indicating a continued decline in public debt until the middle of the decade.
While the IMF forecast paints a grim picture of the UK’s medium-term economic outlook, the World Organization has highlighted Britain’s rapid growth this year as the economy recovers from a sharp recession in 2020, posing higher inflation risks Is. .
He attributed the strong growth prospects for 2021 to the success of the UK’s early COVID-19 vaccination program and the depth of last year’s economic slowdown.
Sunak praised the IMF’s outlook for this year as he travels to Washington for the fund’s annual meetings, without addressing the UK’s poor performance on the IMF timetable throughout the pandemic.
These new forecasts show the strength of our recovery, with the UK registering the fastest expected growth in the G7 this year. “Our plan is working,” the chancellor said.
The overall outlook of the IMF paints a darker picture of recovery. It expects production in the United States, Canada and Japan to be higher in 2019 than forecast before the pandemic began in 2024.
The International Monetary Fund said Italy, Germany and France would have only short long-term marks, while the UK was at the bottom of the G7 table with 3% lower output than the Fund forecast for 2019 by mid-decade.
At the same time, he predicted that the UK government’s borrowing would remain above 3% of national income, preventing the Chancellor from realizing his budget ambition to balance the current budget, leaving investments until the next election. . According to IMF projections, net public debt as a share of national income will also continue to grow until 2026.
International Monetary Fund chief economist Gita Gopinath said there was “significant uncertainty” about the fund’s outlook. The Office of Budget Responsibility may take a different approach to economics, making the job of a budget advisor less difficult.
But if the FSA takes the same position as the IMF, the chancellor will have very limited room to maneuver for additional public spending to help restart public service delivery and little room for tax cuts before the next elections. Will be
The International Monetary Fund also warned that the global economy faces high inflation risks and called on central banks to “use extreme caution” and take prompt action to tighten monetary policy if prices remain under pressure.