Omicron and supply chain problems will limit economic growth, warns IMF

The global financial body has lowered its gross domestic product growth forecast for this year from five per cent to 4.7 per cent. However, the UK will still be the second-highest performer among the G8 group of top industrialised nations.

The global financial body has lowered its gross domestic product growth forecast for this year from five per cent to 4.7 per cent.

In its latest World Economic Outlook, the IMF said: “In the UK, disruptions related to Omicron and supply constraints, particularly in labour and energy markets, mean that growth is revised down by 0.3 percentage points to 4.7 per cent.”

Spain is expected to have the highest GDP growth among the G8 at 5.8 per cent. That compares with the average for the group of 3.9 per cent.

Next year, the IMF forecasts that the UK economy will grow by 2.3 per cent, an upgrade of 0.4 percentage points, and again the second-highest in the G8.

However, Spain’s growth was raised by 1.2 points to 3.8 per cent.The average for the G8 will be 2.6 per cent.

The IMF has downgraded its global GDP growth forecast for this year by half a point to 4.4 per cent. It is predicting slower US and Chinese economies, rising food and energy prices, worker shortages, record debt and wider uncertainty, such as events in the Ukraine.

Michael Hewson, chief market analyst at CMC Markets, said: “The latest growth forecasts from the IMF would appear to bear these concerns out as it cuts its global growth forecast for this year from 4.9 per cent to 4.4 per cent, with the fund acknowledging that global risks are tilted to the downside.”

IMF first deputy managing director Gita Gopinath said that although the global economy faces a number of challenges the one posed by Omicron will be relatively short-lived.

She said: “The IMF’s latest world economic outlook anticipates that while Omicron will weigh on activity in the first quarter, this effect will fade starting in the second quarter.”

Omicron is judged to be less severe than Delta while the surge in infections is expected to decline relatively quickly.