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26 Jan 2021 | 15:27

IMF downgrades expectations for UK economic recovery in 2021

(Sharecast News) - The International Monetary Fund updated its World Economic Outlook forecasts on Tuesday and said it now expects the UK's economic recovery to be weaker than previously forecast in 2021 as the country takes longer than others to return to pre-Covid-19 levels. After slumping 10% in 2020, the IMF said Britain's gross domestic product will grow by 4.5% in 2021, down from the 5.9% previously predicted, while overall global growth was pencilled in at 5.5%, an upgrade of 0.3% to reflecting the rollout of Covid-19 vaccines and economic stimulus packages across the world.

IMF chief economist Gita Gopinath said: "After a severe recession in 2020, we are projecting the global economy to grow by 5.5% in 2021 and 4.2% next year. The 2021 number is 0.3% above our October forecast. And it reflects the positive effects of the vaccine success that we saw towards the end of last year and the additional policy support that was provided in some countries. But it has been offset some by the resurgence of virus in several economies and the containment measures that have been put in place that are having a negative effect on activity."

Both the US and Japan were predicted to return to levels last seen at the end of 2019 in the second half of the year, while the EU and the UK were both expected to "remain below end-2019 levels" into 2022.

"The wide divergence reflects to an important extent differences across countries in behavioural and public health responses to infections, flexibility and adaptability of economic activity to low mobility, pre-existing trends, and structural rigidities entering the crisis," the IMF said.

Gopinath did also warn that there was a great deal of uncertainty" around the forecasts, with greater success with vaccinations and additional policy support likely to improve outcomes, while slow vaccine rollout, virus mutations and premature withdrawal of support could also worsen them.
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