The International Monetary Fund [IMF] has said that the UK economy is set to grow more slowly in 2022 than previous forecasts had suggested.
The IMF’s latest global economic outfit has revised the predictions for UK economic growth to 4.7 per cent this year, down from five per cent, but this remains the fastest growth within the G7.
Much of that upward momentum is fuelled by the rebound effect from the Covid-19 pandemic, after the economy plummeted in 2020 because of the lockdowns.
Gita Gopinath, chief economist at the IMF, told BBC reporters that there was a strong case for targeted help for vulnerable households in the UK over 2022, with the rising cost of living likely to have an adverse impact.
Gopinath explained: “The UK has done very well on the vaccination front, on testing and tracing and so on. All that has to be continued.
“An argument can be made that, especially for instance, in April, as more of the energy price pass-through happens, then that could be a big, sharp increase in the cost of living. And one could see a case for very, very targeted help to highly vulnerable households for a short space of time.”
In the 12 months to December 2021, inflation stood at 5.4 per cent in the wake of higher food and utilities prices.
Globally, the IMF expects growth to drop from 5.9 per cent last year to 4.4 per cent over 2022, revising its annual growth down by half a percentage point compared to its previous forecast in October 2021.
In its latest report, the IMF declares that the global economy has entered the New Year in a “weaker position than expected” with rising energy prices and supply chain disruptions driving inflation.
Commenting on supply chain disruption in the construction industry, Martin Mockler, lead advisory partner at London-based accounting, auditing, business and tax advisory firm, Evans Mockler, said: “From our clients’ perspective, supply chain has been a significant issue, primarily for contractors looking to import.
“Significant cost increases have had an impact and particularly in the construction sector some of our clients that may have agreed contracts 18 months ago to carry out a job for a certain price, have now found that their operating costs for completing the job have gone up significantly because getting hold of certain materials has been a problem.”
New Covid curbs in some countries in the wake of the Omicron variant have also hampered recovery in some nations and stunted potential growth.
The IMF report says: “Rising energy prices and supply disruptions have resulted in higher and more broad-based inflation than anticipated, notably in the US and many emerging market 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.”
The IMF also said in its latest economic forecast that the world economy would be hit by high inflation for longer than expected, explaining that it is likely to last for much of the year thanks to uncertainty arising from supply chain issues, volatility in energy prices and localised wage pressures.
Elsewhere, the IMF has revised down its growth projections for both China and the US. China’s expected growth was cut from 5.6 per cent for the year to 4.8 per cent, while US predicted growth went from 5.2 per cent to four per cent after factoring out the effects of president Joe Biden’s monetary policies after the legislation’s progress in Congress was halted.
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