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IMF downgrades UK growth forecast

Germany, France and Spain are all expected to exceed growth expectations.

The International Monetary Fund (IMF) has downgraded its growth forecast for the UK after weaker-than-expected economic performance.

In its latest World Economic Outlook, the organisation said it now expects the economy to grow by 1.7%, down from April’s 2.0% prediction.

It comes in contrast to other major European countries, such as Germany, France and Spain, where growth exceeded expectations, the IMF said.

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(PA graphic)

The Treasury said the report shows why securing the “very best deal” on Brexit with the European Union is “vitally important”.

Prime Minister Theresa May has previously insisted that no deal is better than a bad deal when Britain quits the bloc.

“The growth forecast has also been revised down for the United Kingdom for 2017 on weaker-than-expected activity in the first quarter,” the IMF said.

“By contrast, growth projections for 2017 have been revised up for many euro area countries, including France, Germany, Italy, and Spain, where growth for the first quarter of 2017 was generally above expectations.”

UK growth forecasts for next year remain unchanged at 1.5%, the IMF said.

Maurice Obstfeld, chief economist of the IMF, said the figure was based purely on economic growth so far in 2017, rather than any concerns over Brexit in the future.

He told BBC Radio 4’s Today programme: “I think we stick to our forecasts that Brexit will be a negative to the British economy.

“Our forecasts are right now that it’s a mild negative, because we have a favourably optimistic view of how the negotiations will go. But if the parties are not reasonable and collaborative, things could be worse.”

The Treasury insisted the fundamentals of the UK economy are strong, with employment at a record high and the deficit down by three quarters since 2009.

Mrs May’s official spokesman described the IMF assessment as “one of a number of forecasts”.

The spokesman added: “Owing to years of hard work and sacrifice by the public, the UK economy is in a strong position. We have employment at a record high and the deficit down by three-quarters. We will continue to deliver greater prosperity and higher living standards for hard-working people across the country.”

Shadow chancellor John McDonnell said: “Today’s report from the IMF is yet another blow for the Government and its continued austerity agenda that is holding our country back.

“It further reveals that this Government has no real plan for Brexit and no real plan to deal with the problem of earnings not keeping up with prices, which is undermining growth and risking living standards.”

Liberal Democrat leader Sir Vince Cable said: “One of the most frequently rehearsed arguments of the Brexiteers for leaving the EU has always been the low growth of the eurozone.

“How ironic, then, that the IMF now predicts the eurozone will out-perform what it politely describes as Britain’s ‘tepid’ economic performance.”

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