In its latest outlook for the global economy, the International Monetary Fund (IMF) has cut its growth forecasts for the UK severely for the current year, in the wake of the latest wave of the pandemic and the newly discovered strains of coronavirus. The IMF now expects the UK economy to grow by 4.5% in 2021, 1.4% lower than its previous projections made in October 2020.

Unlike the global economy for which the international organization has revised growth forecasts higher, the UK’s GDP forecast suffered a sharp downgrade after the discovery of the more virulent strains that forced the government to impose strict lockdowns again. While the lockdowns have been eased, restrictions are expected to continue until at least the mid of February and further hurt the UK economy.

According to its estimates, the economy in the UK is expected to have undergone a 10% contraction during 2020 – one of the worst affected developed economies, due to the pandemic. Meanwhile, economists have forecast that the UK could be headed towards a double-dip recession as a result of the latest round of lockdowns and restrictions.

In its report, the IMF observes, “Surging infections in late 2020 (including from new variants of the virus), renewed lockdowns, logistical problems with vaccine distribution, and uncertainty about take-up are important counterpoints to the favorable news [on vaccines]. Much remains to be done on the health and economic policy fronts to limit persistent damage from the severe contraction of 2020 and ensure a sustained recovery.”