UK economy set for smaller hit in 2023 than previously feared – IMF

(Reuters) – Britain now looks set for a shallower economic hit this year than previously thought but remains on course to suffer the sharpest contraction among the worlds big, advanced economies, the International Monetary Fund said on Tuesday.

British gross domestic product will contract by 0.3% in 2023, the IMF said in its latest set of global forecasts, a smaller shrinkage than the 0.6% contraction the Fund predicted in January.

Britain is no longer the only Group of Seven economy set for a fall in GDP this year as Germany is now expected to shrink by 0.1%, the IMF forecasts also showed.

After narrowly avoiding recession in 2022, Britains economy has shown some signs of resilience in early 2023. The Bank of England says it expects slight growth in the second quarter after a small contraction in the first three months of the year.

Prime Minister Rishi Sunak and finance minister Jeremy Hunt are under pressure to get Britains economy growing more quickly before an election expected next year but so far they have defied pressure from within their Conservative Party to cut taxes, saying they are focused primarily on lowering inflation.

The IMF forecast Britain‘s inflation would average 6.8% in 2023, down from 9.1% in 2022 but still way above the BoE’s 2% target and the highest among the G7 countries.

(Writing by William Schomberg; Editing by Chizu Nomiyama)