The Bank of England’s forecasts for the UK economy may be worse than gloomy projections from the International Monetary Fund earlier this week.

The UK central bank expects the economy to shrink 0.5% this year. That’s similar to the IMF’s forecast for an 0.6% contraction that placed Britain below both the Group of Seven nations and Russia.

“We are pretty similar this year,” BOE Governor Andrew Bailey said at a press conference Thursday. “We have both got pretty small negative numbers. The difference is what happens thereafter. They have growth picking up more rapidly than we do.”

Next year, while the IMF has the UK growing by 0.9%, the Bank has another decline of 0.25%. The BOE said part of the difference is a pessemistic outlook for the labour market after many people dropping out of the workforce since the pandemic.

“There are a couple of things that could have contributed to the relative weakness of the UK that are not just pure noise,” said BOE Deputy Governor Ben Broadbent. “Participation hasn’t come back here in the same way it has elsewhere.”

Broadbent also noted the UK “is more dependent on gas” than the US. A third factor may be the speed at which interest-rate increases feed through to the rest of the economy.

“It may also be, and this is what the IMF chief economist said, there is faster transmissible of monetary policy,” adding that these are “not things that will endure forever.”

  - Bloomberg