The IMF has issued new growth forecasts for the world. They are better than expected for almost every country, except one, which is the UK.
However, that being said, the fact that the UK’s situation is such an outlier is worthy of comment. What is going on?
There are essentially four aspects to the UK’s failure.
The first is that the way in which we price energy, with massive bias to energy companies at cost to all consumers, is a factor in this. The policy of believing monopolies should be allowed to price as if they are competitive enterprises (albeit, ones not ultimately allowed to fail) is the recession we have got. The government engineered this failure.
We don’t have a monopoly in energy in the UK. So that’s toss.
Second, unlike the eurozone, we are increasing interest rates by too much and for too long. I personally do not approve of any of the rate rises in the last year, but the price of the Bank of England’s absurd desire to appear tough on inflation over which it has precisely no control and which will go away despite anything they have and will do has been enormous, with the worst still to come. The government engineered this failure.
The US raised interest rates more than the UK and earlier. US growth is higher than UK. So that’s toss.
Third, the government has chosen austerity as a response. The right response was more spending, because in a downturn counter-cyclical spending is what is required of governments, but ours is cutting instead. The result is that the recession is being exaggerated by government policy. The government engineered this failure.
” we expect a budget deficit of 6.5% in 2023 – little changed from 2022, but significantly lower than the 13.1% deficit in 2020.”
That’s not austerity so that’s toss.
Fourth, to compound this the government is imposing pay austerity to break public sector workers and destroy public services when if there is 10% inflation and if there were 10% pay rises then all the money needed to make inflation matching pay rises is automatically available to make them. Instead the government is denying such rises, baking recession, declining disposable incomes and continuing stress in the rest of the economy into the system as a result. The government engineered this failure.
Money printer go brr is getting a little old now that inflation went to 10%, isn’t it?