Arabic version: صندوق النقد الدولي يتوقع أن تواجه المملكة المتحدة أكبر تأثير اقتصادي من النزاع الإيراني

The International Monetary Fund (IMF) has forecasted that the UK will experience the most significant economic impact from the ongoing war in Iran among major economies. According to BBC News, the IMF has revised its growth estimate for the UK in 2023 down to 0.8%, a decrease from the previous projection of 1.3% made in January before hostilities began.

The IMF attributed this downgrade to the war’s energy shock, fewer anticipated interest rate cuts, and the expectation that the effects of rising energy prices will persist into the following year. It also warned that a prolonged conflict in the region could lead to a global recession, urging central banks to exercise caution regarding interest rate increases to combat inflation.

The UK’s revised growth forecast is the largest reduction among advanced economies, placing it in a middling position relative to its peers. The IMF noted that as a net importer of energy, the UK is particularly vulnerable to fluctuations in energy prices. However, it anticipates a recovery in 2024, predicting the UK will once again become the fastest-growing economy in the smaller G7 group, albeit at a slower growth rate of 1.3%.

In addition to its growth forecast, the IMF projected that the UK would experience the highest inflation in the G7 this year, at 3.2%, alongside the US. While UK inflation is expected to rise temporarily towards 4%, it is predicted to return to the Bank of England’s target of 2% by the end of 2027 as the impact of higher energy prices diminishes.

Chancellor Rachel Reeves acknowledged the costs associated with the conflict, stating, “The war in Iran is not our war, but it will come at a cost to the UK.” She emphasized the need for continued efforts to stabilize the economy. Meanwhile, IMF chief economist Pierre-Olivier Gourinchas cautioned that countries like the UK should be careful about introducing assistance programs, as there is limited fiscal space available due to the ongoing war. The IMF’s outlook remains cautious, hinging on a relatively swift resolution to the conflict in the Gulf.