Britain's economy the only G7 country to shrink in 2023 - IMF

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The UK economy will stagnate and perform poorly compared to other advanced economies as the cost of living continues to rise in households.

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The IMF says the economy will contract by 0.6% in 2023, instead of growing slightly as previously predicted.

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In its World Economic Outlook update, the IMF, which works to stabilize economic growth, forecast UK gross domestic product (GDP) will shrink rather than grow by 0.3% this year.

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Britain will be the only country among the world's advanced and emerging economies to suffer a year of GDP decline.

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The IMF said its new forecast reflects UK financial conditions such as high energy prices and high inflation.

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IMF chief economist Pierre-Olivier Gaurinchas told the BBC that for 2022, the UK was set for "quite strong" growth of 4.1%, which he said was "one of the strongest growth numbers in Europe".

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"But it is true that we are predicting a sharp recession in 2023, with growth that will also turn negative for the year."

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Monetary policy has been tightened by the Bank of England as a response to this high inflation and in the UK it quickly feeds into mortgages, as a lot of mortgages are adjustable rates," he said.

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Mr Gourinchas also said a factor in the UK forecast was that employment was still below pre-pandemic levels.

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However, the IMF said that UK growth is expected to be 0.9% in 2024, up from 0.6% previously.

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The Bank of England will publish its new forecast for the UK economy later this week, with interest rates expected to rise further.

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