IMF calls for easing of austerity
The International Monetary Fund has delivered a blow to George Osborne by downgrading its UK growth forecast for 2013 and issuing a 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%, down from the 1% it expected in January. It also cut its forecast for growth in 2014 from 1.8% to 1.5%. 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 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".
At a press conference yesterday, IMF chief economist Olivier Blanchard said that the fund will be talking to UK policymakers in the coming months to "see what can be done".
In response to the UK downgrade, the Treasury pointed out that the UK is still forecast to grow by more than Germany (which is expected to expand by just 0.6%) in 2013.
"We are slowly but surely fixing this country's economic problems," said a spokesman. Government sources indicated there will not be a change of fiscal course in response to the IMF advice.