London, 25 February 2022 (TDI): According to the International Monetary Fund (IMF), the UK is showing considerable recovery in its economy and is rebounding nicely amidst growing inflationary pressure.
Growth is expected to be at 4.7% in 2022. The short-term growth potential is promising however, inflation is also a major concern. One of the key contributing factors to the recovery is the fast vaccination rate that the country has witnessed.
As of this week, over 41 million individuals have been fully vaccinated while approximately 31 million have received their booster shot. Additionally, the country has also implemented a number of accommodative policies that have also helped bolster the rebound.
Monetary policy, however, needs to change in order to control inflation. England is currently facing an inflation rate of 5.40%. Communication needs to take place in order to a reduction in high borrowing costs and rate hikes to normalize the economy in 2023.
The IMF has also suggested an increase in taxes to help reduce inflation rates as forecasts estimate an increase to 7% in the coming months. The fund iterated that the Bank of England should continue to raise interest rates steadily in the face of rising inflation to a neutral setting.
Persistent and high inflation is the major obstacle that the UK economy is facing right now. Despite continued challenges with the Omicron variant and its effects on numerous industries and sectors throughout the nation, the financial system has held up well.
Household and corporate balance sheets have not been swayed too much by the pandemic, however, non-bank financial institutions and core financial markets could be better underpinned.
The country is also facing ongoing problems with Brexit. Regional inequality has greatly impacted England’s Plan for growth, which is the government’s plan to support economic growth through investment in infrastructure, skills, and innovation. Additional investment in transport infrastructure and digital connectivity will be required in order to reduce inequality.
