The International Monetary Fund (IMF) has lowered its growth forecasts for the UK and the rest of the world.
In its latest quarterly report, the IMF cut its forecast for UK GDP growth this year by one percentage point to 3.7%.
“Consumption is projected to be weaker than expected as inflation erodes real disposable income, while tighter financial conditions are expected to cool investment,” the organisation said.
The forecast for global growth was downgraded from 4.4% to 3.6%, with the IMF saying that conditions had “worsened significantly” since its last update in January, before Russia’s invasion of Ukraine.
With Russia a major energy producer and both Russia and Ukraine being key exporters of staples such as wheat and corn, the consequences of the war will extend far beyond their borders, the IMF warned.
It said that inflation was now a “clear and present danger” in many countries and the situation has added to supply problems linked to the Covid-19 pandemic.
The IMF now predicts that inflation in “advanced economies” will hit 5.7% this year, while it is likely to reach 8.7% in emerging markets.
In 2023, the UK is expected to have the slowest GDP growth in the G7 at just 1.2%, down from the 2.3% forecast previously, with inflation reaching 5.3% — the highest in the G7.