UK Economy to Grow Less Than Expected in 2024, IMF Warns

Published: 16 April 2024 at 14:18

Finance & Economics

The UK's gross domestic product (GDP) is forecasted to expand by just 0.5% in 2024 and 1.5% in 2025, making it the second worst performer in the G7 this year and the third best in 2025. Inflation is expected to remain around 2.5% this year but fall towards the Bank of England's 2% target next year. When analysed per head, GDP shows no growth in 2024 and 1.1% in 2025, reflecting living standards. The IMF warns that the global economy has been resilient, but escalating conflicts in the Middle East could raise food and energy prices, affecting lower-income countries more.

DEEP DIVE

IMF Chief Warns of Potential Lackluster Global Growth in 2024

The International Monetary Fund's Managing Director, Kristalina Georgieva, warns that strong economic activity in the United States and emerging markets is projected to drive global growth by about 3% in 2024, below the annual historic average, indicating a potential lackluster performance through the 2020s. Global economic activity remains weak, with debt posing challenges to public finances worldwide, and the scars of the pandemic still evident. The IMF anticipates global growth slightly above last year's projection, with the IMF and World Bank set to discuss pressing economic issues at their upcoming spring meetings in Washington.

UK Unemployment Rate Rises to 4.2% with 85,000 More Jobless Individuals

The UK's unemployment rate has climbed to 4.2%, with 85,000 more people out of work in the December-February quarter, reaching a total of 1.44 million jobless individuals. The number of employed individuals decreased by 156,000 to 32.98 million, and 150,000 more were economically inactive, totaling 9.404 million. In March, payrolled employees decreased by 67,000 to 30.3 million. ONS director Liz McKeown notes signs of the job market cooling, urging caution due to greater volatility in quarterly changes. The UK's latest labor market figures for December 2023 to February 2024 show employment at 74.5%, unemployment at 4.2%, and economic inactivity at 22.2%.

UK manufacturing sector sees improvement in output and orders, but global issues impact foreign demand

The UK's manufacturing sector experienced a boost in output to a 20-month high in March, ending a period of contraction since July 2022. Domestic orders increased, indicating a recovery from the economic downturn of 2023. However, global challenges continue to limit foreign orders, particularly affecting exports to mainland Europe. Job losses slowed, with exports falling for the 26th consecutive month but at a slower rate. Despite positive growth indicators and improved business optimism, supply chain disruptions and weak export performance remain concerns.

Asian Development Bank Upgrades Growth Forecast for China and India

The Asian Development Bank has raised China's growth forecast to 4.8% in 2024, expecting fiscal policies to drive investment in manufacturing and infrastructure, while also predicting a strong performance in high-tech sectors and foreign direct investment. In India, the ADB increased the GDP growth forecast for the current fiscal to 7%, attributing it to public and private sector investment and improved consumer demand. The bank projected India's growth at 7.2% for 2025-26, emphasizing the country's importance in the Asia-Pacific region.

List of countries by GDP (PPP) (Wikipedia)

GDP (PPP) means gross domestic product based on purchasing power parity. This article includes a list of countries by their forecast estimated GDP (PPP). Countries are sorted by GDP (PPP) forecast estimates from financial and statistical institutions that calculate using market or government official exchange rates. The data given on this page are based on the international dollar, a standardized unit used by economists. Certain regions that are not widely considered countries such as Hong Kong also show up in the list if they are distinct jurisdiction areas or economic entities.GDP comparisons using PPP are arguably more useful than those using nominal GDP when assessing the domestic market of a state because PPP takes into account the relative cost of local goods, services and inflation rates of the country, rather than using international market exchange rates, which may distort the real differences in per capita income. It is however limited when measuring financial flows between countries and when comparing the quality of same goods among countries. PPP is often used to gauge global poverty thresholds and is used by the United Nations in constructing the human development index. These surveys such as the International Comparison Program include both tradable and non-tradable goods in an attempt to estimate a representative basket of all goods.The first set of data on the left columns of the table includes estimates for the year 2023 made for each economy of the 196 economies (189 U.N. member states and 7 areas of Aruba, Hong Kong, Kosovo, Macau, Palestine, Puerto Rico, and Taiwan) covered by the International Monetary Fund (IMF)'s International Financial Statistics (IFS) database. The data is in millions of international dollars and was calculated and published by the IMF in October 2023. The second table includes data, mostly for the year 2022, for 180 of the 193 current United Nations member states as well as Hong Kong and Macau (the two Chinese Special Administrative Regions). Data are in millions of international dollars; they were compiled by the World Bank. The third table is a tabulation of the CIA World Factbook GDP (PPP) data update of 2019. The data for GDP at purchasing power parity has also been rebased using the new International Comparison Program price surveys and extrapolated to 2007. Non-sovereign entities (the world, continents, and some dependent territories) and states with limited recognition (such as Kosovo, Palestine and Taiwan) are included in the list in cases in which they appear in the sources. These economies are not ranked in the charts here, but are listed in sequence by GDP for comparison. In addition, non-sovereign entities are marked in italics.

Bank of England's Economic Forecast Failures Due to Outdated Software and Incremental Changes

A review led by former US Federal Reserve head, Dr Ben Bernanke, highlighted that the Bank of England's economic forecasting quality deteriorated due to outdated software and incrementalism, causing large errors in predicting the cost of living crisis. The Bank faced criticism for underestimating the impact of global shocks like COVID lockdowns and the Ukraine invasion on inflation, leading to delayed interest rate hikes. Dr Bernanke recommended major IT upgrades and suggested modeling various economic scenarios for more accurate forecasts.

China's Potential for Massive Economic Growth Despite Pessimism

Economist Nicholas R. Lardy argues that China has the potential for significant growth in the coming years, likely to outpace the United States. Adjusting for inflation, China's GDP growth exceeded the US. Lardy refutes misconceptions about China's internal spending and investment collapse fears. Despite challenges, renowned economist Huang Yiping predicts China's economy will improve, with a growth target of around 5% for 2024 achievable. Efforts to boost recovery, stabilize employment, and stimulate consumption are emphasized, with a focus on increasing productivity and innovation for sustained growth.

China's Economy Shows Strong Growth in First Quarter of 2024

China's economy started the year with robust growth, with a forecasted year-on-year GDP growth of about 4.8% for the first quarter and around 5.1% for the second quarter. Manufacturing activity expanded at the fastest pace in 13 months in March, with the Caixin/S&P Global manufacturing PMI rising to 51.1. Official factory data also showed positive growth, indicating a bright start to the year. Policymakers aim to maintain high growth rates through fiscal support and stimulus measures amidst lingering uncertainties in the economy.

List of countries by GDP (nominal) (Wikipedia)

Gross domestic product (GDP) is the market value of all final goods and services from a nation in a given year. Countries are sorted by nominal GDP estimates from financial and statistical institutions, which are calculated at market or government official exchange rates. Nominal GDP does not take into account differences in the cost of living in different countries, and the results can vary greatly from one year to another based on fluctuations in the exchange rates of the country's currency. Such fluctuations may change a country's ranking from one year to the next, even though they often make little or no difference in the standard of living of its population.Comparisons of national wealth are also frequently made on the basis of purchasing power parity (PPP), to adjust for differences in the cost of living in different countries. Other metrics, nominal GDP per capita and a corresponding GDP (PPP) per capita are used for comparing national standard of living. On the whole, PPP per capita figures are less spread than nominal GDP per capita figures.The rankings of national economies over time have changed considerably; the United States surpassed the British Empire's output around 1916, which in turn had surpassed the Qing dynasty in aggregate output decades earlier. Since China's transition to a socialist market economy through controlled privatisation and deregulation, the country has seen its ranking increase from ninth in 1978, to second in 2010; China's economic growth accelerated during this period and its share of global nominal GDP surged from 2% in 1980 to 18% in 2021. Among others, India has also experienced an economic boom since the implementation of economic liberalisation in the early 1990s.The first list includes estimates compiled by the International Monetary Fund's World Economic Outlook, the second list shows the World Bank's data, and the third list includes data compiled by the United Nations Statistics Division. The IMF definitive data for the past year and estimates for the current year are published twice a year in April and October. Non-sovereign entities (the world, continents, and some dependent territories) and states with limited international recognition (such as Kosovo and Taiwan) are included in the list where they appear in the sources.

Let misjudgements be, China is still on a growth track

The Chinese economy withstood pressures both at home and overseas to grow 5.2 percent year-on-year in 2023. The additional economic girth exceeded 6 trillion yuan ($830 billion), equivalent to the yearly GDP of a medium-sized economy. The international environment was complex and challenging in 2023, and domestic tasks for reform, development and stability were also arduous and heavy. Pessimistic views of the Chinese economy and those calling for so-called de-risking gained stronger voices, which exaggerated the problems of the Chinese economy's post-pandemic recovery and ignored its strong resilience, great potential and clear vitality.

Comparison of Housing Costs and Quality in the UK with Other Economies

Research by the Resolution Foundation reveals that the UK has the highest housing costs as a proportion of total spending among OECD countries, with older, smaller, and poorer-quality homes compared to countries like Germany, Denmark, France, Taiwan, and Japan. The UK also lags in floor space per person and energy efficiency. Political parties differ in their housing policies, with proposals including renters' rights reforms and targets for new home construction. The UK's housing crisis is attributed to decades of inadequate new home construction and modernization efforts.

Gross domestic product (Wikipedia)

Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced in a specific time period by a country or countries. GDP is more often used by the government of a single country to measure its economic health. Due to its complex and subjective nature, this measure is often revised before being considered a reliable indicator.GDP definitions are maintained by several national and international economic organizations. The Organisation for Economic Co-operation and Development (OECD) defines GDP as "an aggregate measure of production equal to the sum of the gross values added of all resident and institutional units engaged in production and services (plus any taxes, and minus any subsidies, on products not included in the value of their outputs)". An IMF publication states that, "GDP measures the monetary value of final goods and services—that are bought by the final user—produced in a country in a given period (say a quarter or a year)."GDP (nominal) per capita does not reflect differences in the cost of living and the inflation rates of the countries; therefore, using a basis of GDP per capita at purchasing power parity (PPP) may be more useful when comparing living standards between nations, while nominal GDP is more useful comparing national economies on the international market. Total GDP can also be broken down into the contribution of each industry or sector of the economy. The ratio of GDP to the total population of the region is the per capita GDP (also called the Mean Standard of Living).GDP is often used as a metric for international comparisons as well as a broad measure of economic progress. It is often considered to be the world's most powerful statistical indicator of national development and progress. However, critics of the growth imperative often argue that GDP measures were never intended to measure progress, and leave out key other externalities, such as resource extraction, environmental impact and unpaid domestic work. Critics frequently propose alternative economic models such as doughnut economics which use other measures of success or alternative indicators such as the OECD's Better Life Index as better approaches to measuring the effect of the economy on human development and well being.For example, the GDP of Germany in 2023 was 4100 Billion Euro, which included about 10% of taxes like the value-added tax.

List of U.S. states and territories by GDP (Wikipedia)

This is a list of U.S. states and territories by gross domestic product (GDP). This article presents the 50 U.S. states and the District of Columbia and their nominal GDP at current prices.The data source for the list is the Bureau of Economic Analysis (BEA) in 2022. The BEA defined GDP by state as "the sum of value added from all industries in the state."Nominal GDP does not take into account differences in the cost of living in different countries, and the results can vary greatly from one year to another based on fluctuations in the exchange rates of the country's currency. Such fluctuations may change a country's ranking from one year to the next, even though they often make little or no difference in the standard of living of its population.Overall, in the calendar year 2022, the United States' Nominal GDP at Current Prices totaled at $25.463 trillion, as compared to $23.315 trillion in 2021.The three U.S. states with the highest GDPs were California ($3.6 trillion), Texas ($2.356 trillion), and New York ($2.053 trillion). The three U.S. states with the lowest GDPs were Vermont ($40.6 billion), Wyoming ($47.4 billion), and Alaska ($63.6 billion).GDP per capita also varied widely throughout the United States in 2022, with New York ($105,226), Massachusetts ($99,274), and North Dakota ($96,461) recording the three highest GDP per capita figures in the U.S., while Mississippi ($47,572), Arkansas ($54,644), and West Virginia ($54,870) recorded the three lowest GDP per capita figures in the U.S. The District of Columbia, though, recorded a GDP per capita figure far higher than any U.S. state in 2022 at $242,853.

List of countries by GDP (PPP) per capita (Wikipedia)

A country's gross domestic product (GDP) at purchasing power parity (PPP) per capita is the PPP value of all final goods and services produced within an economy in a given year, divided by the average (or mid-year) population for the same year. This is similar to nominal GDP per capita, but adjusted for the cost of living in each country.In 2019, the estimated average GDP per capita (PPP) of all of the countries of the world was Int$ 18,381. For rankings regarding wealth, see list of countries by wealth per adult.

List of countries by past and projected GDP (nominal) (Wikipedia)

This is an alphabetical list of countries by past and projected gross domestic product (nominal) as ranked by the IMF. Figures are based on official exchange rates, not on the purchasing power parity (PPP) methodology. Values are given in millions of United States dollars (USD) and have not been adjusted for inflation. These figures have been taken from the International Monetary Fund's World Economic Outlook (WEO) Database (October 2023 edition) and/or other sources.For older GDP trends, see List of regions by past GDP (PPP).

List of countries by GDP (nominal) per capita (Wikipedia)

The figures presented here do not take into account differences in the cost of living in different countries, and the results vary greatly from one year to another based on fluctuations in the exchange rates of the country's currency. Such fluctuations change a country's ranking from one year to the next, even though they often make little or no difference to the standard of living of its population.GDP per capita is often considered an indicator of a country's standard of living; however, this is inaccurate because GDP per capita is not a measure of personal income.Comparisons of national income are also frequently made on the basis of purchasing power parity (PPP), to adjust for differences in the cost of living in different countries. (see List of countries by GDP (PPP) per capita). PPP largely removes the exchange rate problem but not others; it does not reflect the value of economic output in international trade, and it also requires more estimation than GDP per capita. On the whole, PPP per capita figures are more narrowly spread than nominal GDP per capita figures.Non-sovereign entities (the world, continents, and some dependent territories) and states with limited international recognition are included in the list in cases in which they appear in the sources. These economies are not ranked in the charts here (except Kosovo and Taiwan), but are listed in sequence by GDP for comparison. In addition, non-sovereign entities are marked in italics.Four UN members (Cuba, Liechtenstein, Monaco and North Korea) do not belong to the IMF hence their economies are not ranked below. Kosovo, despite not being a member of the Unity Nations, is a member of IMF. Taiwan is not a IMF member but it is still listed in the official IMF indices.Note that several leading GDP-per-capita (nominal) jurisdictions may be considered tax havens, and their GDP data subject to material distortion by tax-planning activities. Examples include Bermuda, the Cayman Islands, Ireland and Luxembourg.All data are in current United States dollars. Historical data can be found here.

Investors Prefer India Over Japan and China for Economic Expansion and Corporate Profits

According to a Bloomberg Markets Live Pulse survey, India is seen as a better investment prospect than Japan or China due to its ability to turn economic growth into corporate profits. Factors supporting India's attractiveness include the transmission of GDP growth into earnings growth, a track record of consistent earnings growth, and a supportive geopolitical environment. Indian equities trade at around 23 times next year's expected earnings, surpassing the US, Japan, and China. The survey reflects confidence in India Inc amidst upcoming general elections and record-breaking stock market performances in India and Japan.

UK Exports to Canada Face 6% Tariff as Post-Brexit Trade Deal Expires

Starting Monday, UK cars exported to Canada will incur a 6% tariff due to the end of the post-Brexit agreement with the EU. The new tariffs depend on the usage of EU parts in UK exports. The UK's car industry, notably the Society of Motor Manufacturers and Traders (SMMT), is concerned with no timetable set for further talks. Disagreements over trade terms include punitive tariffs on UK cheese by Canada and the UK's ban on Canadian hormone-treated beef imports. Trade talks with Canada are halted, affecting businesses on both sides of the Atlantic.