The UK is the only Group of Seven nation to have suffered a cut to its 2023 economic growth outlook in the International Monetary Fund forecasts published on Tuesday.
The UK economy now looks set to shrink by 0.6% this year, a big downgrade from previously expected growth of 0.3% in the IMF’s last forecast in October.
All other G7 economies are predicted to grow this year, mostly at a stronger pace than the IMF forecast three months ago.
The UK is the only economy in the G7 not to have recovered its pre-pandemic size — with Brexit widely seen as a unique drag.
The IMF said the UK would struggle with a combination of factors including higher taxes announced by finance minister Jeremy Hunt late last year as he tried to restore the confidence of international investors after the disastrous “mini-budget” of former prime minister Liz Truss last September.
The IMF said the UK had also been hit particularly hard by the surge in gas prices after Russia’s invasion of Ukraine as it relied on gas for much of its power generation, and it faced a shortage of workers that was holding back the economy.
“All these factors taken together lead to a fairly sharp retrenchment of activity in 2023,” Pierre-Olivier Gourinchas, the IMF’s chief economist, told reporters.