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Economic Outline

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

The sixth-largest in the world, the British economy's growth has slowed since the 2016 referendum on leaving the European Union (Brexit). The situation worsened with the outbreak of the COVID-19 pandemic, with GDP falling an unprecedented 9.8% in 2020. The downward trend continued in the first quarter of 2021; however, GDP started rebounding since then, with private and public consumption as the main driver, reaching an estimated 6.8%. The IMF expects real UK GDP to reach pre-pandemic levels only by the second quarter of 2022 when business investment is forecast to increase strongly thanks to the ‘super-deduction’, which allows businesses to offset 130% of eligible investment spending. Overall, GDP is forecast to grow 5% this year and 1.9% in 2023. In addition to persistent economic challenges caused by the recrudescence of COVID-19 and Brexit-related trade disruption, the UK is also likely to continue being hit by significant supply-side constraints and acute labour shortages.

The fiscal efforts undertaken in recent years have been jeopardized by the emergency measures the government had to introduce to fight the epidemic-induced crisis, including short-time work schemes, grants for self-employed, grants and tax relief for businesses and additional funding for the NHS, for a total of more than 19% of GDP (EU Commission). Coupled with a decrease in revenues, the general government balance recorded a deficit of 5.6% in 2021, with the debt-to-GDP ratio skyrocketing to 108.5%, from a pre-pandemic level of 85.2% (IMF). As the economy recovers and the fiscal support is scaled back, the budget deficit is expected to gradually decline to 4.9% in 2022 and 3.5% the following year; whereas the general government gross debt should increase further, reaching 109.4% by the end of 2023. Due to a rise in global energy prices and increased consumer spending, inflation accelerated towards the end of the year hitting 2.2%, and is expected to further increase to 2.6% this year before decelerating to 2% in 2023 (IMF). The Bank of England’s Monetary Policy Committee confirmed that some modest tightening of monetary policy over the forecast period is likely in order to meet the inflation target sustainably in the medium term.

The measures taken by the government to support employees and the self-employed helped to contain the rise of the unemployment rate, which stood at an estimated 5% in 2021 (up from 3.8% before the pandemic). Such rate should remain stable in 2022, before decreasing marginally to 4.7% the following year (IMF). The country’s GDP per capita (PPP) was estimated at USD 47,089 in 2021 by the IMF, but the relatively solid macroeconomic performance of the United Kingdom conceals weaknesses and situations of inequality. Thus, as the IMF has emphasised, strengthening human capital is a key priority. The government's efforts to invest in infrastructure, increase the supply of housing and increase the participation of women in the labour market will also help support more sustainable and inclusive growth.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 2,833.302,709.68e3,108.423,442.213,582.34
GDP (Constant Prices, Annual % Change) 1.4-9.8e7.24.72.3
GDP per Capita (USD) 42,417e40,394e46,20050,87952,731
General Government Balance (in % of GDP) -2.31.4e-5.6-4.9-3.5
General Government Gross Debt (in % of GDP) 85.2104.5e108.5107.1109.4
Inflation Rate (%) 1.80.9e2.67.45.3
Unemployment Rate (% of the Labour Force) 3.84.5e5.05.04.7
Current Account (billions USD) -87.65-100.61e-104.62-117.04-115.90
Current Account (in % of GDP) -3.1-3.7e-3.4-3.4-3.2

Source: IMF – World Economic Outlook Database, 2016

Note: (e) Estimated Data

 
Monetary Indicators 20162017201820192020
American Dollar (USD) - Average Annual Exchange Rate For 1 GBP 1.351.291.331.251.28

Source: World Bank, 2015

 

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Latest Update: June 2022

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