Slower than expected economic growth is on the cards this year for the UK, as the economy continues recovering from the Covid pandemic.
In its latest forecasts, the International Monetary Fund (IMF) believes the UK economy will grow by 4.7% in 2022, a downwards revision from its previous estimate of 5%.
Despite this cut in growth expectations for the UK, the IMF places the UK economy at the head of the G7 of industrialised nations for a second consecutive year.
In part, this expectation of G7-leading economic growth reflects the significant economic decline experienced in 2020 at the height of the pandemic.
Also, within its latest economic outlook, the IMF downgraded forecasts for the US and China, saying that new Covid restrictions and high wholesale energy prices will constrain growth in 2022.
Looking at the global economy as a whole, the IMF is now forecasting GDP growth of 4.4% in 2022, down from an previous estimate of 4.9%.
Last year, the world economy grew by an estimated 5.9%.
The IMF report said: “The global economy enters 2022 in a weaker position than previously expected.”
“Rising energy prices and supply disruptions have resulted in higher and more broad-based inflation than anticipated, notably in the US and many emerging markets and developing economies.
“And the ongoing retrenchment of China’s real estate sector and slower-than-expected recovery of private consumption have limited growth prospects.”
Inflation remains a dominant feature of the forecasts, with rising levels of price inflation worldwide expected to continue for longer than expected in the previous estimates and likely remain high throughout 2022.
Supply chain disruptions will also play a role in constraining global economic growth, along with volatility in wholesale energy prices and localised wage pressures.
In the US, the IMF expects the economy to grow by 4% this year, significantly lower than its previous forecast of 5% due to the removal of US President Joe Biden’s Build Back Better fiscal policy from its calculations.
In China, the economic forecast is downgraded from 5.6% to 4.8% in 2022. The IMF commented:
“In China, disruption in the housing sector has served as a prelude to a broader slowdown.
“With a strict zero-Covid strategy leading to recurrent mobility restrictions and deteriorating prospects for construction sector employment, private consumption is likely to be lower than anticipated.”