IMF upgrades UK economic growth to 2.9% in 2014

 

The UK is set to be the world's fastest-growing major advanced economy this year according to a sharply-upgraded forecast from the International Monetary Fund

Gross domestic product (GDP) is expected to increase by 2.9% this year, up from an earlier 2.4% prediction by the global body.

It puts Britain ahead of the US on 2.8%, Germany on 1.7% and Canada at 2.3%. The new figures also upgrade UK growth for next year though they still predict it will be slower than this year.

The latest World Economic Outlook also gives its backing to policies pursued by Chancellor George Osborne and Bank of England governor Mark Carney.

But it sounds a warning over the risk posed by surging house prices and the threat of deflation in the eurozone.

The IMF predicts world growth will accelerate to 3.6% this year and 3.9% in 2015 though it warns that the global recovery is still "fragile" with risks including turbulence from emerging market economies.

But chief economist Olivier Blanchard said: "Put simply, the recovery is strengthening. The various brakes that hampered growth are being slowly loosened."

Tax and spending tightening was slowing and investors are becoming less worried about debt, while banks are becoming stronger.

Mr Blanchard said while the global economy was "far short of a full recovery", normal monetary policy - meaning a withdrawal from stimulus measures such as ultra-low interest rates and money printing - was now on the agenda.

The report warned that policymakers must "avoid a premature withdrawal of monetary accommodation" - supporting Mr Carney's caution about any immediate increase in interest rates.

It also explicitly called on the European Central Bank to take deeper stimulus measures - which it has so far avoided - to try to prevent a deflationary spiral that would put pressure on borrowers and weaken demand and output.

The report said UK growth had "rebounded more strongly than anticipated" though the recovery remained unbalanced, with business investments and exports remaining disappointing.

It said the Bank's monetary policy - which has seen interest rates held at 0.5% for four years and £375 billion of quantitative easing pumped into the economy - should remain "accommodative".

The IMF also backed the Bank's decision to dump forward guidance linking interest rates to unemployment in favour of a link to a more opaque measure of the how far the economy is performing below capacity.

"Similarly, the Government's efforts to raise capital spending while staying within the medium-term fiscal envelope should help bolster recovery and long-term growth," the report said.

It also backed efforts to continue to restore financial sector soundness, but said the UK should "guard against any build-up of financial vulnerabilities, including from surging house prices".

The IMF upgraded its forecast for UK growth in 2015 from 2.2% to 2.5%. But that will still represent a fall on 2014, while the US is expected to see growth accelerate to 3% next year.

A Treasury spokesman said the upgraded forecast was "further evidence that the Government's long-term economic plan is working".

But shadow chancellor Ed Balls said millions were still worse off than when the Coalition came to power and had yet to feel the benefits of economic improvement.

He said: "The IMF is right to warn about an unbalanced recovery and it is concerning that growth is expected to slow down next year.

"The Government should also heed the IMF's warnings about surging house prices by taking action to boost housing supply, as we have called for."

Mr Osborne tweeted: "Good news from IMF: UK forecast to grow faster than any other western country + has biggest upgrade."

But he added: "Job is not done. We need to do more to get our exports and investment going."

The IMF forecast for growth this year is higher than the 2.7% predicted by the Office for Budget Responsibility. But it is lower than the Bank of England's prediction of 3.4% growth.

It marks a sharp turnaround from a year ago when the IMF slashed its outlook for the UK and suggested that Mr Osborne should consider changing his austerity policies. At that time, it cut its forecast for growth to 1.5%.

PA

News
people
News
people
News
peopleStella McCartney apologises over controversial Instagram picture
Life and Style
Laid bare: the Good2Go app ensures people have a chance to make their intentions clear about having sex
techCould Good2Go end disputes about sexual consent - without being a passion-killer?
PROMOTED VIDEO
Arts and Entertainment
Richard Burr remains the baker to beat on the Great British Bake Off
tvRichard remains the baker to beat as Chetna begins to flake
News
i100
Sport
footballArsenal 4 Galatasaray 1: Wenger celebrates 18th anniversary in style
Arts and Entertainment
Amazon has added a cautionary warning to Tom and Jerry cartoons on its streaming service
tv
News
people
News
The village was originally named Llansanffraid-ym-Mechain after the Celtic female Saint Brigit, but the name was changed 150 years ago to Llansantffraid – a decision which suggests the incorrect gender of the saint
newsA Welsh town has changed its name - and a prize if you can notice how
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Kristen Scott Thomas in Electra at the Old Vic
theatreReview: Kristin Scott Thomas is magnificent in a five-star performance of ‘Electra’
News
Destructive discourse: Jewish boys look at anti-Semitic graffiti sprayed on to the walls of the synagogue in March 2006, near Tel Aviv
peopleAt the start of Yom Kippur and with anti-Semitism flourishing, one Jew can no longer ignore his identity
Life and Style
Couples who boast about their relationship have been condemned as the most annoying Facebook users
tech
Arts and Entertainment
Hayley Williams performs with Paramore in New York
musicParamore singer says 'Steal Your Girl' is itself stolen from a New Found Glory hit
News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Trust Accountant - Kent

NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

Law Costs

Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

Day In a Page

Italian couples fake UK divorce scam on an ‘industrial scale’

Welcome to Maidenhead, the divorce capital of... Italy

A look at the the legal tourists who exploited our liberal dissolution rules
Time to stop running: At the start of Yom Kippur and with anti-Semitism flourishing, one Jew can no longer ignore his identity

Time to stop running

At the start of Yom Kippur and with anti-Semitism flourishing, one Jew can no longer ignore his identity
Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

The vintage series has often been criticised for racial stereotyping
An app for the amorous: Could Good2Go end disputes about sexual consent - without being a passion-killer?

An app for the amorous

Could Good2Go end disputes about sexual consent - without being a passion-killer?
Llansanffraid is now Llansantffraid. Welsh town changes its name, but can you spot the difference?

Llansanffraid is now Llansantffraid

Welsh town changes its name, but can you spot the difference?
Charlotte Riley: At the peak of her powers

Charlotte Riley: At the peak of her powers

After a few early missteps with Chekhov, her acting career has taken her to Hollywood. Next up is a role in the BBC’s gangster drama ‘Peaky Blinders’
She's having a laugh: Britain's female comedians have never had it so good

She's having a laugh

Britain's female comedians have never had it so good, says stand-up Natalie Haynes
Sistine Chapel to ‘sing’ with new LED lights designed to bring Michelangelo’s masterpiece out of the shadows

Let there be light

Sistine Chapel to ‘sing’ with new LEDs designed to bring Michelangelo’s masterpiece out of the shadows
Great British Bake Off, semi-final, review: Richard remains the baker to beat

Tensions rise in Bake Off's pastry week

Richard remains the baker to beat as Chetna begins to flake
Paris Fashion Week, spring/summer 2015: Time travel fashion at Louis Vuitton in Paris

A look to the future

It's time travel fashion at Louis Vuitton in Paris
The 10 best bedspreads

The 10 best bedspreads

Before you up the tog count on your duvet, add an extra layer and a room-changing piece to your bed this autumn
Arsenal vs Galatasaray: Five things we learnt from the Emirates

Arsenal vs Galatasaray

Five things we learnt from the Gunners' Champions League victory at the Emirates
Stuart Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

This deal gives England a head-start to prepare for 2019 World Cup, says Chris Hewett
Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

The children orphaned by Ebola...

... then rejected by surviving relatives over fear of infection
Pride: Are censors pandering to homophobia?

Are censors pandering to homophobia?

US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence