The International Monetary Fund (IMF) predicts that the UK will be one of the worst performing economies in the world this year.

According to the report, the UK economy will perform the worst among the G20's 20 largest economies in 2023, which also includes Russia, which is currently under sanctions.

The IMF expects the UK economy to contract this year, which is a slight improvement over its previous prediction.

Additionally, it foresaw a "rocky road" ahead for the world financial system.

It comes after the failure of two US banks last month, which was swiftly followed by rival UBS's hasty acquisition of Swiss banking giant Credit Suisse, raising concerns about the possibility of a new financial crisis.

The UK was predicted to experience a downturn this year by the IMF and finish last among the G7, a grouping of the seven biggest so-called "advanced" economies that control trade and the global financial system. During the pandemic rebound in 2022, the UK led the group.

The UK economy is now anticipated to contract by 0.3% in 2023 before expanding by 1% the following year.

The IMF's most recent forecast is slightly better than its earlier expectation of a 0.6% contraction, made in January, even though the UK is expected to have the worst economic performance this year.

British exposure to high gas prices, rising interest rates, and sluggish trade performance have all been cited by IMF researchers as contributing factors to the country's poor economic performance.

The purpose of forecasts is to provide a general indication of what is most likely to occur in the future, but they are not always accurate. For instance, an analysis of global recessions between 1992 and 2014 by the IMF found that previous forecasts correctly predicted less than 10% of them a year in advance.

Chancellor Jeremy Hunt responded to the most recent IMF forecasts by stating: "Our IMF growth forecasts have been upgraded by more than any other G7 country.

"We are currently on the right path for economic growth," according to the IMF. "By following the plan, we will reduce inflation by more than half this year, relieving pressure on everyone."

However, Labour's shadow chancellor Rachel Reeves claimed that the projections demonstrated "just how far we continue to lag behind on the global stage"

She continued, "This matters not just because 13 years of slow growth under the Tories have weakened our economy, but also because it explains why families are worse off, are subject to a Tory mortgage penalty, and are witnessing the fastest decline in living standards in recorded history.

The forecast, according to Sarah Olney of the Liberal Democrats in the Treasury, is "another damning indictment of this Conservative government's record on the economy"

Many forecasters believe there is less chance of a UK recession this year. When an economy contracts for two consecutive three-month periods, it is typically said to be in a recession.

Currently, the independent Office for Budget Responsibility anticipates a 0.2% contraction of the economy this year, but not a recession.

Andrew Bailey, governor of the Bank of England, recently stated that he was "much more hopeful" for the economy and that it was no longer on the verge of entering a recession.

As new forecasts are made, the world economy is still recovering from the pandemic and the energy shock caused by the Ukraine war.

The recent instability in the global banking markets, however, has raised concerns about the wider impact, according to the IMF.

The IMF now anticipates that global growth will decrease from 3.4% in 2022 to 2.8% in 2023 before gradually increasing and leveling off at 3% in five years.

However, it issued a warning that the global economy might contract even more this year if there is increased financial sector stress.

Separately, the IMF predicted that due to low productivity and aging populations, real interest rates—which account for inflation—will decline in major economies to pre-pandemic levels.

In order to slow the rate of price increases, also known as inflation, central banks in the US, UK, Europe, and other countries have been raising interest rates.

The UK's inflation rate has reached its highest level in almost 40 years as a result of rising energy and food prices. The Bank of England has been raising interest rates in response, raising them to 4.25% last month.

The IMF, however, stated that "recent increases in real interest rates are likely to be temporary" in a blog post.