Double blow for George Osborne as IMF downgrades UK growth forecast and calls for a Plan B
Chancellor has placed great emphasis on IMF’s support for his plans since his first Budget
The International Monetary Fund delivered a blow to George Osborne by downgrading its UK growth forecast for 2013 and issuing a politically awkward call for the Chancellor to ease up on his austerity programme.
In its latest World Economic Outlook the IMF slashed its forecast for Britain in the present year to 0.7 per cent, down from the 1 per cent it expected in January. It also cut its forecast for growth in 2014 from 1.8 per cent to 1.5 per cent. The combined downgrade was larger than for any other advanced economy.
Mr Osborne has placed great emphasis on the IMF’s support for his fiscal consolidation plans since his first Budget in June 2010. But yesterday the multilateral Washington-based institution spelled out a reversal of this support, saying the UK recovery was weak and that “consideration should be given to greater near-term flexibility in the fiscal adjustment path”.
Last May the IMF in its annual review of the UK said economy said Mr Osborne should consider what amounts to a Plan B if growth deteriorated. There are now fears that Britain could fall into a triple dip recession and the IMF’s intervention yesterday represents a hardening of its position. At a press conference yesterday the IMF’s chief economist Olivier Blanchard said the Fund will be talking to UK policymakers in the coming months to “see what can be done”.
The shadow chancellor Ed Balls, who has long called for a Plan B, said that the IMF was “right to step up their warnings and insist that a change of economic policy is considered right now”. Mr Balls added: “These downgraded growth forecasts are yet another damaging blow to a downgraded Chancellor whose economic policies have totally failed”.
In addition to its suggestion of a change of fiscal course, the IMF said that the Bank of England should consider “other forms of monetary easing”, in a reference to suggestions the Bank should buy assets other than Gilts in its Quantitative Easing programme. This is something the Bank’s outgoing Governor, Sir Mervyn King, has consistently opposed, although the incoming Governor, Mark Carney, is more amenable.
The IMF downgraded its 2013 global growth forecast from 3.5 per cent in January to 3.3 per cent, reflecting what it described as a “bumpy” recovery for advanced economies. The eurozone outlook is now expected to suffer a larger contraction this year, shrinking by 0.3 per cent rather than the 0.1 per cent expected in January. The IMF downgraded France and Italy by 0.4 per cent points respectively for 2013.
However Japan, which has launched a significant programme of monetary and fiscal stimulus since January received a hefty upgrade from the IMF. The Asian economy is now seen as growing by 1.6 per cent in 2013 and 1.4 per cent in 2014, an upgrade of 0.4 per cent and 0.7 per cent respectively.
In response to the UK downgrade the Treasury pointed out that the UK is still forecast by the IMF to grow by more than Germany in 2013 ( which is expected to expand by just 0.6 per cent). “We are slowly but surely fixing this country’s economic problems” said a spokesperson. Government sources indicated there will not be a change of fiscal course in response to the IMF advice.
- 1 President of Argentina adopts Jewish godson to 'stop him turning into a werewolf'
- 2 Doctors remove 80 teeth from boy's jaw
- 3 The 'Black Museum': After 150 years, public set to see exhibits from police’s grisly crime museum
- 5 Sir Winston Churchill’s family begged him not to convert to Islam, letter reveals
President of Argentina adopts Jewish godson to 'stop him turning into a werewolf'
The 'Black Museum': After 150 years, public set to see exhibits from police’s grisly crime museum
Downfall of Dustin 'Screech' Diamond, the 'Saved By The Bell' star charged with bar stabbing
Syrian teenager Usaid Barho reveals how he escaped from Isis using a suicide vest
Sir Winston Churchill’s family begged him not to convert to Islam, letter reveals
Millions of Britons struggling to feed themselves and facing malnourishment
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
Nigel Farage: Ukip leader named 'Briton of the year' by The Times
Immigrants make UK racist, says Ukip councillor Trevor Shonk
£25000 - £30000 per annum: Recruitment Genius: A Maintenance Assistant is requ...
£32000 - £40000 per annum: Recruitment Genius: A Business Manager is required ...
£45000 - £55000 per annum: Recruitment Genius: This is an exciting opportunity...
£20000 per annum: Recruitment Genius: Panel Wireman required for small electro...