World News | UK economy to avoid recession, but inflation remains a concern, says IMF

LONDON, May 23 (AP) — The U.K. economy will avoid recession this year, according to a growth forecast upgraded by the International Monetary Fund on Tuesday.

In its latest assessment of the UK economy, the Washington-based fund said domestic demand was more resilient than expected in the face of soaring energy costs.

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The IMF now sees the UK economy growing by 0.4% this year, up from a previous forecast of a 0.3% decline. The forecast is in line with that of the Bank of England, which also raised its economic outlook this month.

However, the IMF said inflation was likely to remain high for years to come and not return to the Bank of England’s 2% target until mid-2025, six months longer than predicted earlier this year.

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Like other central banks, the Bank of England has been aggressively raising interest rates over the past 18 months or so following a sharp spike in inflation, first because of bottlenecks caused by the coronavirus pandemic and then because of Russia’s invasion of Ukraine, which sent energy and food prices soaring.

Data on Wednesday are expected to show UK inflation slipping back below 10% for the first time since August, largely as a price spike caused by Ukraine’s invasion will fall out of annual comparisons.

The IMF also praised the British government for rebuilding its credibility after a “stressful event” in which the short-lived government of former prime minister Liz Truss cut taxes sharply last September.

The mini-budget sent borrowing costs sharply higher and raised concerns about the viability of some pension funds as financial markets questioned the government’s unfunded tax cuts.

Truss’ tenure as prime minister ended quickly, with the Conservatives promoting Rishi Sunak to the helm.

He and his finance minister, Jeremy Hunt, have made restoring confidence in Britain’s finances by reversing tax cuts and austerity spending as their top priority.

With a general election next year and with the Conservatives trailing badly in opinion polls, Sunak is under increasing pressure to cut taxes and the IMF has warned against such an approach. (Associated Press)

(This is an unedited and auto-generated story from a Syndicated News feed, the content body may not have been modified or edited by LatestLY staff)