UK Faces Another Year of Stagnant Living Standards

UK Faces Another Year of Stagnant Living Standards

London (Parliament News) – UK faces a second year of stagnant living standards, IMF forecasts. Despite expected growth, inflation and economic challenges persist into 2024.

UK’s households will bear a second year without any progress in their living standards in 2024 as the consequences of high inflation take time to abate, the International Monetary Fund has disclosed. In its flagship World Economic Outlook (WEO), the Washington-based IMF stated it was forecasting mediocre 0.5% UK growth this year – but only as a consequence of a rising population. 

According to the Guardian, the IMF expressed there would be a pick-up in the economy as the 2024 model – something the government is banking on to decrease its opinion poll deficiency with Labour – but it would not be until 2025 that the expense of living crisis would be over.

How Will the UK’s Economy Fare in 2024?

Although official stats due out on Wednesday are anticipated to show a fall in the UK’s annual inflation pace to about 3%, the IMF thinks the Bank of England will be careful about cutting interest rates, and has pencilled in only two 0.25 percentage points indents in official borrowing costs this year. 

Is IMF’s Prediction of Growth Realistic for the UK?

The tightness of Britain’s labour market – dating back to before the appearance of COVID-19 – might describe why inflation had been more elevated than in the US or eurozone after the beginning of the pandemic, it stated. “Growth in the UK is cast to rise from an estimated 0.1% in 2023 to 0.5% in 2024, as the faded negative effects of high energy prices weaken, then to 1.5% in 2025, as disinflation permits financial conditions to ease and real incomes to recover.”

Overall, the WEO uncovered a marked divergence between the faster-growing US and the lagging performance of the UK and other EU economies. While the US is anticipated to grow by 2.7% in 2024, the eurozone is expected to expand by 0.8%. Germany is en route to being the slowest growing partner of the G7 group of big developed nations, with the IMF casting growth of 0.2%. France and Italy are expected to grow by 0.7%, Japan by 0.9% and Canada by 1.2%.

As in the UK, the IMF states growth will be more vulnerable across much of the G7 once population shifts are taken into account. US per capita growth is cast to be 2.1%, Germany 0.1%, France 0.5%, Italy 0.8%, Japan 1.3% and Canada -1.1%.

What Challenges Does UK’s Economy Face

Pierre-Olivier Gourinchas, the IMF’s economic counsellor, conveyed that the US overperformance comparable to other rich countries might not last since it was in a position due to unsustainable tax and spending guidelines by the federal government.

“The exceptional recent performance of the United States is certainly impressive and a major driver of global growth, but it echoes strong demand factors as well, including a fiscal stance that is out of line with long-term fiscal sustainability,” Gourinchas expressed.

Can UK Overcome Stagnation Amid Economic Forecasts?

The half-yearly WEO was completed before last weekend’s incursions on Israel by Iran, but the report highlighted a broader Middle East conflict was one of the downside threats to its forecasts.

“The conflict in Gaza and Israel could escalate further into the wider region. Continued attacks in the Red Sea and the ongoing war in Ukraine risk generating additional supply shocks adverse to the global recovery, with spikes in food, energy, and transportation costs,” it stated.

A spokesperson for the UK Treasury stated: “Today’s report indicates we are winning the battle against high inflation, with the IMF forecasting that it will drop much faster than previously expected. “The forecast for expansion in the medium term is optimistic, but like all our peers, the UK’s growth in the brief term has been impacted by higher interest rates, with Germany, France and Italy all undergoing larger downgrades than the UK.”

Federica Calabrò

Federica Calabrò is a journalist at Parliament News, She is covering Business and General World News. She is a native of Naples, commenced her career as a teller at Poste Italiane before following her passion for dance. Graduating in classical dance, she showcased her talents with two entertainment companies, enchanting audiences throughout Italy. Presently, Federica serves as the general secretary at the Allianz Bank Financial Advisors financial promotion center in Naples. In this capacity, she manages office forms, provides document assistance for Financial Advisors, oversees paperwork for the back office, and ensures smooth customer reception and assistance at the front office. Outside her professional obligations, Federica indulges in her passion for writing in her leisure time.