The UK has muscled out its rich nation rivals to top the table for economic growth this year.
Britain’s economy will expand 6.8 per cent this year, a faster rate of growth than any other G7 country, according to the International Monetary Fund (IMF).
Despite trimming its forecasts by 0.2 percentage points, the UK will grow nearly two percentage points faster than the Eurozone and 0.8 percentage points quicker than the US.
The IMF upped its projection for UK growth next year to five per cent. Global growth was downgraded to 5.9 per cent.
Chancellor Rishi Sunak said: “These new forecasts show the strength of our recovery, with the UK having the fastest growth forecast in the G7 this year. Our plan is working.”
The organisation fired a warning shot to the cream of the central banking crop to be ready to clamp down on rampant inflation.
“Central banks should be prepared to act quickly if the risks of rising inflation expectations become more material in this uncharted recovery,” said Gita Gopinath, chief economist at the IMF.
Markets kicked off this week by strengthening bets on the Bank of England hiking rates in December this yar after governor Andrew Bailey and external rate setting committee member Michael Saunders signalled their agitation toward the UK’s current inflation clip.
The Office for National Statistics estimates CPI inflation rose at its fastest monthly rate on an annual basis last month, jumping to 3.2 per cent, while the Bank expects it to top four per cent, more than double its target.
The IMF recognised the current economic environment could lead to a deadly wage/price spiral, a similar scenario that produced ‘stagflation’ conditions that plagued the UK in the 1970s.
“Should households, businesses, and investors begin anticipating that price pressures from pent-up demand and the many factors outlined above will persist, there is a risk that medium-term inflation expectations could drift upward and lead to a self-fulfilling further rise in prices,” it said.
Inflation globally is progressing at a fiery clip, driven by severe supply and demand mismatches triggered by the ongoing impact of the pandemic.
Commodity and energy prices have soared on scarce supplies of natural gas and fuel rubbing up against a resurgence in global demand generated by nations pushing to get their economies back to pre-Covid strength.
“As the recovery picked up steam in 2021, some producers found themselves flatfooted and unable to ramp up sufficient supply again quickly,” the IMF said.
The report was released after weeks of speculation swirled over the fate of the IMF chief Kristalina Georgieva‘s fate after she was accused of cooking data measuring China’s credibility as a place to do business at the World Bank.
The IMF board gave its full backing to Georgieva.