IMF Raises Its Growth Forecast for UK Economy After 2020 Crash

IMF Raises Its Growth Forecast for UK Economy After 2020 Crash

The International Monetary Fund raised its forecast for British economic growth which is set to outpace the euro zone this year after its slump in 2020 but is unlikely to regain its pre-pandemic size until some time in 2022.

The IMF said Britain’s economy would grow by 5.3% in 2021, up from a previous forecast of 4.5% it made in January, helped by the country’s fast COVID-19 vaccination programme and a latest round of stimulus by the government.

Britain has suffered Europe’s highest COVID-19 death toll and its economy shrank by almost 10% last year, the worst performance among the region’s big economies except for Spain.

But it has moved more quickly than almost all other countries with its coronavirus vaccination programme. Almost half the total population of the United Kingdom has had a first jab compared with less than 15% in Germany and France.

The IMF forecasts published on Tuesday predicted growth of 4.4% for the euro zone in 2021 and 3.6% for Germany, while France was expected to show a 5.8% expansion.

However, the IMF forecasts do not take into account new lockdown measures announced by France and other countries in continental Europe in recent weeks.

Britain is in the process of easing its third lockdown which began in January.

Both Britain and the euro zone will take longer to recover from the economic hit from COVID than the United States or Japan, which are both on track to return to pre-crisis levels of output this year, the IMF said.

The 0.8 percentage-point upgrade for the U.K. economy was stronger than increases of 0.1 and 0.3 percentage points for Germany and France respectively, but less than a 1.2 percentage-point improvement for struggling Italy.

Petya Kovea-Brooks, deputy director of the IMF’s research department, said the extra round of emergency spending and tax cuts announced last month by finance minister Rishi Sunak accounted for just under half the increase in Britain’s 2021 growth forecast.

Sunak, responding to the IMF’s forecasts, said the vaccines rollout and the lifting of restrictions on the economy meant “there are reasons for optimism, and we are paving the way for brighter times ahead.”

For 2022, the IMF raised its forecast to British economic growth slightly to 5.1% which would be the strongest expansion among Europe’s big economies next year, according to the Fund.

Writing by William Schomberg Editing by David Milliken and Andy Bruce Thomas Reuters Foundation