Under pressure: IMF chief Kristalina Georgieva
The International Monetary Fund (IMF) will come under pressure this week to revise its gloomy forecasts for the UK.
Figures showing that the economy grew again at the beginning of the year have forced the Washington-based institution to modify its data.
IMF officials have been in Britain this month compiling their latest periodic check on the health of the economy and will present their findings on Tuesday.
The IMF’s latest forecast in April suggested the UK’s gross domestic product (GDP) would grow by just 0.5 per cent this year.
However, the latest official figures show Britain grew by 0.6 percent in the first quarter alone, recovering after a dismal end last year when it fell into recession.
IMF staff have met this month with Treasury and Bank of England officials, as well as other experts, including the Institute for Fiscal Studies, a leading think tank.
Its findings will be revealed by CEO Kristalina Georgieva at a press conference alongside Chancellor Jeremy Hunt.
The mood between them may have turned cold after the IMF recently warned that Hunt’s cuts to national insurance could increase debt. The IMF has previously said the Government should spend more money on the NHS and the transition to net zero.
But the Chancellor is likely to hail a UK improvement as the latest evidence that Britain has turned the corner. In addition to the excellent GDP figures, optimism has been boosted by the sharp drop in inflation, which was in double digits at the beginning of last year.
Data this week is expected to show it is approaching its 2 percent target for the first time in almost three years.
That should mean interest rate cuts are coming this summer. The Bank of England has said a cut could come in June, providing relief to borrowers.
Optimistic signs for the economy have already led several forecasters to improve their economic outlook for 2024.
Deutsche Bank, Pantheon Macroeconomics and Capital Economics expect UK GDP to grow 0.8 percent this year.
Panmure Gordon chief economist Simon French, who had a bullish view on the UK even before the first quarter data, said he is “now more confident that I am on the right side of the argument”.
It expects growth of 1.2 percent this year.
Sam Miley, managing economist at the Center for Economics and Business Research (CEBR), said: “We think the IMF forecast is pessimistic.”
The CEBR predicts one percent growth as consumer spending is boosted by falling inflation and high wages. Miley added that other challenges facing the economy “are also expected to ease this year,” including interest rate cuts in the coming months.