LONDON (Dispatches) - The war in Ukraine will severely set back the global economic recovery with the UK hit harder than most, the International Monetary Fund has said.
The conflict is driving up prices for food and fuel which the international body expects to slow growth globally.
It has cut its global forecast and also downgraded its outlook for the UK.
This means the UK will no longer be the fastest growing economy in the G7 group of leading Western nations, and will be the slowest in 2023, it says.
The body says that UK growth will slow as price pressures lead households to cut spending, while rising interest rates are expected to “cool investment”.
The UK’s economy is now predicted to grow by 3.7% this year, down from the previous forecast of 4.7% made in January.
However, next year, the UK is expected to have the slowest growth in the G7 and across Europe’s main economies, at just 1.2%, a near halving from the 2.3% expected previously.
The 2023 UK figure is the slowest apart from heavily-sanctioned Russia in the wider G20 grouping, which includes nations such as China and India.
The IMF said that the UK was the fastest growing G7 economy in 2021, and is forecast to be the second fastest in 2022.
The low UK growth rates forecast in 2023 are in part due to the UK rebounding more quickly from the pandemic than some of its G7 peers.
However, the UK is also wrestling with high inflation, which will hit growth in 2023, as people cut spending as their real income shrinks, the IMF said. The organization expects inflation to peak in late 2022 at 9%.
It said rising interest rates will also slow the UK economy in 2023 and 2023, while government policies such as getting rid of certain tax breaks will reduce business investment at that time.