According to the IMF, it no longer expects a British recession this year

The IMF said on Tuesday that the UK would escape recession this year, adding that the country’s economy had been “boosted by resilient demand in the context of falling energy prices”.

However, the fund warned that Britain was at risk of sustained inflation unless interest rates remained high for longer.

“Economic activity has slowed significantly compared to last year and inflation remains stubbornly high,” the fund said, adding that “growth prospects, while improving somewhat in recent months, remain subdued.”

The IMF predicted earlier this year that the British economy would contract by 0.5 percent between the last quarter of 2022 and the last quarter of this year.

But in a major upgrade, they say the economy will expand by 0.4 percent in 2023, reflecting stronger wage growth, more supportive fiscal policy and a faster easing of global pressure from energy prices and supply chain disruptions.

GDP is expected to grow by 1 percent in 2024, and by an average of 2 percent in 2025 and 2026.

But the IMF warned that inflation would remain above the Bank of England’s 2 percent target for six months longer than it predicted last month, until mid-2025.

“Further monetary tightening is likely to be needed and interest rates will need to remain higher for an extended period of time,” it said.

The fund warned against “premature celebrations”, with the risk that high energy prices would be replaced by more persistent price and wage pressures, which could lead to an elevated “plateau” in inflation.