`Skilful' Chancellor wins rave review from the IMF

Eve of Budget: The UK gets a glowing report as DTI prepares to boost small business

THE BRITISH economy got a rave review from the International Monetary Fund yesterday. The IMF praised the Government for its "skillful management" and said prompt monetary and fiscal policy responses should ensure that the economic slowdown would be short-lived.

There was room for further interest-rate cuts, the IMF's annual health check concluded. The IMF is forecasts that growth will slow to 0.8 per cent this year, slightly lower than its last published forecast, with the risk that it could be lower if world demand weakens again.

Apart from this caveat, Gordon Brown could not have asked for a more positive assessment on the eve of Tuesday's Budget. The IMF said: "The United Kingdom has significantly improved the architecture of macro-economic policymaking." It went on: "Executive Directors commended the authorities for the UK's impressive economic performance."

A Treasury statement welcomed the findings of the annual "Article IV" consultation. It said: "The Government is now addressing the fundamental structural weaknesses which have held Britain back for decades."

The IMF had special praise for the operational independence of the Bank of England and for the openness of its decisions. Britain had set an example other countries should follow, it said.

The fund welcomed the symmetric inflation target, which allowed the Bank to cut interest rates rapidly as growth slowed. "Monetary and fiscal policies are in a good position to ensure that the slowdown will be limited and of short duration."

The assessment said the Chancellor must stick to his plans to keep government borrowing low, saying his rules to limit current spending and keep the national debt at a sustainable level "did not impose clear enough limits on future policies". It urged him to go further in improving the transparency of fiscal policy, publishing more detail on public spending and on "tax expenditures" such as the new Working Families Tax Credit.

The summary also noted that some of the fund's board of directors were concerned that the national minimum wage could have an adverse effect on jobs.

However, it welcomed the broad thrust of the welfare-to-work measures introduced by the Government. Indeed, it recommended more of the same in order to shrink the poverty trap, although recognising that this would require extra public spending.

The IMF's forecast of growth of 0.8 per cent in 1999 is, as with other recent forecasts, below the 1 to 1.5 per cent predicted by the Treasury in November's Pre-Budget Report. The Chancellor has decided nevertheless to stick to his more upbeat forecast, a move likely to raise some eyebrows in the City.

Inflation will hit the 2.5 per cent target, while unemployment will edge up to 5 per cent on average in 1999, according to the report. The strong pound means that the trade balance is holding growth back. The balance of payments deficit is expected to widen further this year.

The Government's commitment to stability had created a virtuous circle of greater confidence, rising demand, job gains, reduced unemployment and higher asset prices, the IMF said.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

£16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

Day In a Page

The long walk west: they fled war in Syria, only to get held up in Hungary – now hundreds of refugees have set off on foot for Austria

They fled war in Syria...

...only to get stuck and sidetracked in Hungary
From The Prisoner to Mad Men, elaborate title sequences are one of the keys to a great TV series

Title sequences: From The Prisoner to Mad Men

Elaborate title sequences are one of the keys to a great TV series. But why does the art form have such a chequered history?
Giorgio Armani Beauty's fabric-inspired foundations: Get back to basics this autumn

Giorgio Armani Beauty's foundations

Sumptuous fabrics meet luscious cosmetics for this elegant look
From stowaways to Operation Stack: Life in a transcontinental lorry cab

Life from the inside of a trucker's cab

From stowaways to Operation Stack, it's a challenging time to be a trucker heading to and from the Continent
Kelis interview: The songwriter and sauce-maker on cooking for Pharrell and crying over potatoes

Kelis interview

The singer and sauce-maker on cooking for Pharrell
Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea