UK economy to outperform Germany this year, says International Monetary Fund

The IMF expects the UK economy to grow by 0.4% this year, it said on Tuesday, confirming predictions published in May as part of its annual economic health check.

This represents a big upgrade compared with the 0.3% contraction it predicted in April, when the UK was forecast to be the worst major economy in the world, even compared to Russia.

The IMF said the UK’s improvement reflected “stronger-than-expected consumption and investment from the confidence effects of falling energy prices” the Daily Telegraph reported.

Confidence among UK businesses has improved for the first time in two years, a separate survey by the Confederation of British Industry showed, while PwC said British consumers were the most upbeat they have been in 18 months.

The IMF said the Windsor Framework agreement had also helped trade between Northern Ireland and Great Britain thanks to “lower post-Brexit uncertainty”.

Britain’s financial sector has also remained “resilient” following the collapse of Silicon Valley Bank in the US and Credit Suisse in Switzerland.

German growth will struggle because of an ageing population and “geo-economic fragmentation” that will hit the German economy hard because of its status as an industrial powerhouse with deep trade links with China and the US. The downgrade for Germany means it is now expected to be the worst performing major economy in the world this year.

The IMF forecast expects the UK’s output to grow by 0.4% during 2023, faster than Germany, but slower than any other country in the Group of 7 (G7).

It is an upgrade by 0.7% compared to the IMF’s previous forecast. Consumption was stronger than expected and Brexit uncertainty had reduced, the IMF said.

Growth in the US is expected to be the most rapid of all G7 countries at 1.8%, the IMF said on Tuesday. This will be followed by Canada (1.7%), Japan (1.4%), Italy (1.1%), France (0.8%), the UK (0.4%) and Germany, where output is expected to shrink 0.3%.