United Kingdom: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the United Kingdom

July 11, 2023

Preview Citation

Format: Chicago

United Kingdom: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the United Kingdom, (USA: International Monetary Fund, 2023) accessed December 21, 2024

Summary

Market stress following the September 2022 'mini-budget' has dissipated, in the context of a successful financial stability intervention by the Bank of England (BoE) and two prudent budgets. Post-Brexit uncertainty has declined somewhat due to the Windsor Framework agreement to resolve disputes around the Northern Ireland Protocol. Still, the economy faces several challenges. The post-pandemic recovery was disrupted by the sharp energy price shock due to Russia’s war in Ukraine; labor force participation has declined, mainly on account of rising long-term illness; and large policy rate increases—needed to arrest high and sticky inflation—have tightened financial conditions. Accordingly, and despite recent upgrades, GDP growth is forecast at a modest 0.4 percent for 2023, followed by 1 percent growth in 2024. Lower energy prices and emerging economic slack is projected to help reduce headline inflation to around 5¼ percent by end-2023 and to the 2 percent target by mid-2025. Risks are tilted to the downside for growth and to the upside for inflation. Tighter-than-expected global financial conditions present the key downside risk to growth, while robust wage growth and greater inflation persistence pose upside risks to inflation.

Subject: Energy prices, Financial institutions, Financial sector policy and analysis, Financial sector stability, Inflation, International organization, Monetary policy, Nonbank financial institutions, Prices, Public debt

Keywords: BoE website, Energy prices, Financial sector stability, Global, Inflation, Inflation expectation, Inflation projection, May inflation outturn, Nonbank financial institutions, UK financial system

Publication Details

Pages:

112
Volume:

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DOI:

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Issue:

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Series:

Country Report No. 2023/252
Stock No:

1GBREA2023001
ISBN:

9798400248627
ISSN:

1934-7685

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