Rachel Reeves is braced for a fresh round of downgrades as the floundering economy is battered by the Iran war.
The International Monetary Fund will slash its global growth forecasts when it publishes its World Economic Outlook in Washington tomorrow – with the UK facing the threat of stagflation and even recession.
The watchdog’s latest health-check on the economy will make bleak reading after the Iran war drove up the price of oil and gas, triggering an inflation shock that is hitting households and businesses.
The Chancellor, who is due to arrive at the IMF’s spring meetings in Washington tomorrow, has warned Britain faces ‘significant’ economic challenges as a result of the Middle East conflict. But critics point out the UK was floundering before the war erupted, with unemployment at a five-year high, inflation the highest in the G7 and the economy flatlining.
Uncomfortable: Rachel Reeves is braced for a fresh round of downgrades as the floundering economy is battered by the Iran war
Shadow Chancellor Mel Stride said: ‘Rachel Reeves is forever pointing the finger of blame –it’s never her fault – but you can’t blame the storm when you’ve already sunk the ship.
‘Britain is weaker and far more exposed thanks to Rachel Reeves’ choices.
‘The Chancellor can’t hide behind events abroad when the damage is being done at home through higher taxes and spending and borrowing like there’s no tomorrow.’
In its last set of forecasts in January, the IMF projected global growth of 3.3 per cent this year, with expansion of just 1.3 per cent pencilled in for the UK.
But speaking last week, the Fund’s managing director Kristalina Georgieva said forecasts will be downgraded when it updates the outlook tomorrow.
The looming downgrades come after the Organisation for Economic Cooperation and Development warned Britain would be hardest hit by the war of all the G7 nations.
The group slashed its UK growth forecast for this year by 0.5 percentage points to just 0.7 per cent and raised its inflation projection by 1.5 percentage points to 4 per cent.
In both cases it is the biggest hit for any member of the G7 group of advanced nations.
The crisis has dashed hopes of further interest rate cuts this year with borrowers now fearing an increase.
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