The International Monetary Fund (IMF), which previously warned that the chancellor’s mini-budget would cause prices to rise, has increased its condemnation of it.
The organisation, which aims to stabilise economic growth, acknowledged that Kwasi Kwarteng’s tax cuts would temporarily increase growth.
But it claimed that the price hikes would “be complicated” by the reduction.
With Slovakia being outside of the eurozone, it is anticipated that high costs will continue for a longer period in the UK.
According to the IMF’s most recent assessment of the global economy, inflation, which measures how the cost of living grows over time, is predicted to reach a peak in the UK before the end of the year at roughly 11.3%.
It anticipates that price increases will be far higher than the Bank of England’s target of 2% in each of the next two years, averaging around 9%.
Although the UK economy is expected to increase the fastest among the G7 group’s major economies this year, growth is only expected to reach 0.3% in the following year.
The IMF issued a warning that the world economy was experiencing a downturn, with “the worst yet to come,” as the war in Ukraine helped drive up global prices.
It was noted that poorer households frequently spend more on food, heating, and fuel than wealthier households do, all of which have suffered sharp price increases as a result of restrictions on grain and energy exports during the invasion of Ukraine.
Russia’s economy is anticipated to have the largest decline of all the countries included in the estimates, with a contraction of 2.3% in 2019.
IMF head Kristalina Georgieva said in a speech on Monday that rising interest rates in the US were “beginning to hurt” and that continued COVID restrictions were also slowing down growth in China.
She stated that countries might “lower the agony ahead of us in 2023” by engaging cooperatively during the first face-to-face meetings between the IMF and the World Bank since the outbreak.
The IMF will encourage big economies to continue their efforts to lower living costs, she continued, even if doing so may have a detrimental effect on economic development.