economics

economics Recent weakness, the Fund assessed, was only “temporary”. The most likely outcome, the IMF said, was that growth would build to a rate of about 2.5 per cent in the medium term after the “largely temporary” rises in energy prices hitting growth had diminished. In the concluding statement of the IMF’s annual mission to Britain as part of its “Article IV” surveillance of the economy, the IMF said: “Strong fiscal consolidation is under way and remains essential to achieve a sustainable budgetary position, thus reducing fiscal risks.


The Fund’s assessment will please Mr Osborne, who came under pressure from 52 academics and economists at the weekend to “adopt a Plan B” for the economy without the “self-defeating” and “breakneck deficit-reduction plan”.Economists are divided on the need to reverse the planned cuts to public spending, with many still seeing the need for rapid deficit reduction despite the disappointing economic news since the autumn. But almost all would agree that the deficit should fall more slowly if growth is slower than expected. Speaking on Monday morning, Mr Osborne rejected any suggestion he should adopt a new economic strategy, saying deficit reduction was the “rock” on which the recovery was being built. “We have flexibility built into our plan,” Mr Osborne told the BBC. “But what our plan provides is credibility where there was no credibility, stability where there was no stability, confidence that actually the British economy is getting its act together.”The IMF has nevertheless removed the rose-tinted spectacles it wore when it last carried out a mission to the UK last September and concluded that the economy was “on the mend”.



Then, it thought growth in 2011 would be 2 per cent, a figure it revised down to 1.7 per cent by April, and it has since said the figure would be revised lower again to 1.5 per cent to take account of disappointing growth in the first quarter of the year. For 2012, the IMF was expecting 2.3 per cent growth late last year, below the 2.5 per cent forecast by the Office for Budget Responsibility and used by the Treasury. The Fund forecast last November that in 2015, public sector borrowing would account for 2.3 per cent of national income, significantly higher than the OBR’s forecast of 1 per cent for the financial year 2015-16, reflecting the slower growth it expects.

economics