Boost for Britain as IMF forecasts joint strongest growth in G7

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·Senior City Correspondent, Yahoo Finance UK
·2-min read
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Gita Gopinath, the chief economist of the International Monetary Fund. Photo: Andrew Caballero-Reynolds/AFP via Getty Images
Gita Gopinath, the chief economist of the International Monetary Fund. Photo: Andrew Caballero-Reynolds/AFP via Getty Images

The International Monetary Fund (IMF) has upgraded its forecast for Britain's economic growth this year, after a largely successful vaccine rollout led to a stronger-than-expected bounce back.

The IMF on Tuesday published its latest forecasts of growth rates around the globe in its World Economic Outlook. The report now expects the UK economy to expand by 7% in 2021, a significant upgrade on April's forecast of 5.3%.

The UK's COVID-19 vaccination programme has accelerated since April, allowing Britain to relax all remaining legal restrictions on activities. Economic activity has been solid since reopening.

The new IMF projection means the UK is on track to record the joint strongest growth among advanced economies this year, on a par with the US.

The strong bounce back follows one of the sharpest slumps of any major economy in 2020, as COVID-19 battered the UK's dominant services sector. The UK economy contracted by 10% last year, its biggest drop in 300 years.

Chancellor Rishi Sunak said: "There are positive signs that our economy is rebounding faster than initially expected, with the IMF forecasting the UK to have the joint highest growth rate in 2021 among the G7 economies.

"That said, we still face challenges ahead as a result of the impact of the pandemic, which is why we remain focused on protecting and creating as many jobs as possible through our Plan for Jobs."

The IMF said the global economy was forecast to expand by 6% this year, unchanged from April's estimate. However, chief economist Gita Gopinath said the "composition" of growth had changed.

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"Growth prospects for advanced economies this year have improved by 0.5 percentage point, but this is offset exactly by a downward revision for emerging market and developing economies driven by a significant downgrade for emerging Asia," she wrote in a blog post.

Gopinath said the divergence was being driven by differing levels of vaccinations between advanced and emerging economies.

"Close to 40% of the population in advanced economies has been fully vaccinated, compared with 11% in emerging market economies, and a tiny fraction in low-income developing countries," she wrote. "Faster-than-expected vaccination rates and return to normalcy have led to upgrades, while lack of access to vaccines and renewed waves of COVID-19 cases in some countries, notably India, have led to downgrades."

Gopinath called for wealthy nations to band together to support poorer countries in their vaccination efforts, saying such overseas aid could "save countless lives, prevent new variants from emerging, and add trillions of dollars to global economic growth."

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