Squashing the sombrero of recovery? IMF cut UK growth because of Covid & Brexit

The UK's about a v-shaped recovery will face serious headwinds from a second wave of coronavirus, and Brexit and the economy will not go back to pre-pandemic levels in 2021, the IMF has reported.

Experts at the body said the first sharp economic rebound seemed to be being hurt by rising unemployment and force on corporate balance sheets.

“We are at a time of high uncertainty. We're not projecting a return to pre-crisis levels in 2021,” said Kristalina Georgieva, the IMF's md.

“We are very keen to advise everyone to become agile and flexible in policy response because the pandemic continues.”

The IMF now projects the UK economy will contract by 10.4% in 2021 and just grow by 5.7% the coming year, worse than previous expectations.

In June it projected a 10.2% contraction this year and 6.3% development in 2021.

Unemployment

It asserted persistent unemployment minimizing productivity growth will keep gross domestic product (GDP) around 3% to 6% below its pre-pandemic trend for that medium term.

The IMF praised the united kingdom “authorities' aggressive policy response Body of the best types of co-ordinated action globally”, but warned that policy support will have to continue to see the economy through Covid-19 and help it to transition after Brexit.

The report found there's a case a larger investment to fuel the recovery, if the effectiveness of projects can be maintained.

The UK was already coping with pre-existing economic challenges like regional inequality, transitioning to some post-Brexit regime, poor productivity growth and an ageing population prior to the pandemic.

Ms Georgieva said the IMF's expectations incorporate a presumption that the UK and EU will reach a deal.

Chancellor Rishi Sunak said: “We have a responsibility to guarantee the next generation inherits a strong economy backed by strong public finances.

“Let's be absolutely clear on what the fund are saying today: it's to offer the economy for the short term but with time, as well as in line with other major economies, we must get our public finances back on a sustainable path.”