Britain’s financial problems will continue well into next year, the International Monetary Fund has warned.

Experts at the major financial institution said ‘stubbornly’ high inflation is to blame for the ongoing decline.

While the IMF said the economy is set to grow at a rate of 3.6% this year, this growth is expected to fall to just 0.3% in 2023.

The UK and other countries have recently hiked base interest rates to help tame spiralling inflation but this has made borrowing more expensive for households and businesses.

Next year’s predicted rate was downgraded from 0.5% in the wake of Kwasi Kwarteng’s disastrous mini-Budget, which sparked the pound to plummet.

Filtering in the Budget would probably ‘lift growth somewhat’, but it is also likely to ‘complicate the fight against inflation’, the IMF said.

The Bank of England’s interest rate is currently 2.25% and it is expected to be raised further at decision makers’ next meeting in November.

This is set to take its toll next year as consumers cut back on spending and businesses slow down investments, resulting in slower growth, the IMF said.

Germany and Italy are the only advanced economies predicted to see weaker growth than the UK in 2023.

Meanwhile, Russia’s economy is expected to fall by a staggering 2.3% next year – the biggest drop of all the nations included in projections.

Globally, the forecast for growth remains unchanged for 2022 – at 3.2% – but the IMF’s economists cut their guidance for 2023, from 2.9% to 2.7%.

IMF economic counsellor Pierre-Olivier Gourinchas said: ‘As storm clouds gather, policymakers need to keep a steady hand.

‘Increasing price pressures remain the most immediate threat to current and future prosperity by squeezing real incomes and undermining macroeconomic stability.’

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