Russia’s economy is set to grow more than Britain’s in 2024, IMF figures show
Shocking new figures show the Russian economy is forecast to grow faster than Britain’s, however, a leading expert has said the data may not show the UK’s recent upwards revision.
The UK is expected to record the weakest economic growth across the G7 group of advanced economies in 2024, according to analysis published by the International Monetary Fund (IMF) on Tuesday (October 10).
In a new assessment of the UK economy, the IMF marginally upgraded its growth prediction for UK gross domestic product (GDP) this year to a paltry 0.5 percent, up from a measly 0.4 percent.
It would be weakest performance across the G7, according to the IMF which also downgraded its forecasts for the UK economic growth next year.
The IMF had pointed towards one percent growth in the UK for 2024, but this has been reduced to 0.6 percent amid pressure from higher interest rates.
But Julian Jessop, an economics fellow at the Institute of Economic Affairs thinktank, told Express.co.uk no one should ever take IMF forecasts too seriously as the figures are already out of date.
He added: “The UK numbers do not include the recent upward revisions to economic growth between 2020 and 2022. They are also based on what the markets were expecting on interest rates last month. These have since been revised down.
“Interest rates have only recently returned to normal levels and people should not expect big cuts any time soon. But rates are likely to be cut again next year as inflation falls back to its two percent target.”
Shoppers in London’s Regent Street
Recent revisions from the Office for National Statistics (ONS) are not factored into the IMF report, according to the Government. The ONS has said the UK saw the third fastest recovery in the G7 from the pandemic through to the fourth quarter of 2021.
IMF forecasts used market expectations for interest rates as of the end of August, which forecast a peak Bank rate around 50bp higher than that used for their forecasts in July. The Government maintains this is one factor explaining the UK’s 2024 growth downgrade.
Market expectations for the peak rate have slipped back since end-August and are now more in line with the IMF’s assumptions in July.
Since 2020, Britain has grown faster than France and Germany, with Mr Hunt’s Spring Budget targeting employment and business investment in a bid to boost growth.
The gloomy Britain’s growth forecast compares to GDP forecasts for Russia of 2.2 percent this year and 1.1 percent in 2024, according to the IMF, despite the country having been subject to Western sanctions since its invasion of Ukraine was launched on February 24, 2022.
Professor Sambit Bhattacharyya, Head of Department of Economics at the University of Sussex Business School, said Britain’s growth is being hampered by a productivity slowdown, decline in investments and financial stress due to high Government and private debt levels.
He added growth is also being hindered by fragile banking and financial systems post the 2008 financial crash, higher energy prices and uncertain trading relationships in a post-Brexit world.
Professor Bhattacharyya said: “UK’s financial commitment towards supporting Ukraine is also adding to its fiscal stress in a high interest rate environment.”
He explained Russia benefits from high energy prices and a significant expansion in its war economy.
The economics expert added: “Russia significantly expanded investments in its military production over the last two years which is now yielding higher manufacturing output. It also expanded its grain production which is likely to continue and thereby delivering expansion in agriculture.
“Sanctions are not having the desired effects as it did not impact Russia’s trading relations with China, India, Turkey and other BRICS nations. Experts including Janet Yellen now admit that [the] oil price cap policy also failed.”
Victims of a Russian missile attack are identified in Kharkiv, Ukraine
A 0.6 percent forecast for Britain would represent the worst growth rate across the whole G7, while Canada is expected to have the strongest growth, at 1.6 percent.
Britain would see consumer price index (CPI) inflation at 7.7 percent for the current year, though this is set to slow more sharply to 3.7 percent next year, the IMF analysis shows.
Chancellor, Jeremy Hunt, said: “The IMF have upgraded growth for this year and downgraded it for next – but longer term they say our growth will be higher than France, Germany or Italy.
“To get there we need to deal with inflation and do more to unlock growth – which I will be focusing on in the upcoming Autumn Statement.”
BMW’s factory in Oxford
Operations at Britain’s largest container port, Felixstowe
It expects global economic growth to slow to 2.9 percent in 2024 from an expected three percent this year.
The United States stands out in the IMF’s latest World Economic Outlook with the superpower’s economy forecast to grow this year by 2.1 percent (matching 2022) and 1.5 percent in 2024 (up sharply from the one percent the IMF predicted in July).
As an energy exporter, the US has not been hurt as much as countries in Europe and elsewhere by higher oil prices, which shot up after Russia invaded Ukraine and jumped more recently because of Saudi Arabia’s production cuts.
Consumers in the US have also been more willing than most to spend the savings they accumulated during the Covid pandemic.
The IMF’s Director of Research, Pierre-Olivier Gourinchas, sounded a note of optimism for the global economy.
Mr Gourinchas added: “Despite war-disrupted energy and food markets and unprecedented monetary tightening to combat decades-high inflation, economic activity has slowed but not stalled.
“Even so, growth remains slow and uneven, with widening divergences. The global economy is limping along, not sprinting.”