IMF says UK economy 'on the mend' and praises budget cuts

[Hopeless Romantic]

The International Monetary Fund today said the UK economy was on the mend after its deepest postwar recession and praised the coalition government for its hardline approach to cutting the budget deficit.

In its annual health check of Britain, the Washington-based fund said George Osborne's planned cuts in public spending were unlikely to derail growth.

"The UK economy is on the mend. Economic recovery is underway, unemployment has stabilized, and financial sector health has improved."

In a strong endorsement of the chancellor's plans to slash the UK's record peacetime deficit, the IMF added: "The government's strong and credible multi-year fiscal deficit reduction plan is essential to ensure debt sustainability.

"The plan greatly reduces the risk of a costly loss of confidence in public finances and supports a balanced recovery. Fiscal tightening will dampen short-term growth but not stop it as other sectors of the economy emerge as drivers of recovery, supported by continued monetary stimulus."

After assessing the state of the UK, the IMF team said economic recovery would proceed at a moderate pace, with growth of 2% in 2011 rising to 2.5% in the medium term.

It said the Bank of England would need to be "nimble" if the impact on growth of the budget cuts proved to be more severe than expected. The IMF saw no reason why interest rates needed to be raised from their current emergency level of 0.5%.

The report warned the government against getting cold feet about reform of banks. "The UK authorities should continue to provide leadership and build support for ambitious global reform of financial regulation. Ensuring a smooth transition to a new supervisory architecture at home will also be important to secure a safer post-crisis environment."

Although the IMF saw no evidence of a double-dip recession, it stressed that it would take time for voters to feel the impact. "Households are likely to remain thriftier than before the crisis but will be in a position to gradually raise their consumption as labour markets recover."

http://www.guardian.co.uk/business/2010/sep/27/imf-uk-economy-on-mend

[LeftishBrit]

1. They would. They like cuts.

In fact, some would say that the climate that produced Thatcherism began originally with the IMF's demands on Britain to make spending cuts in return for aid in 1976.

[non sociopath skin]

2. International NeoCon Organisation likes Brit Neocon policies.

And this is news?

The proof of the pudding ....

The Skin

[Jeneral2885]

3. IMF is parallel to the Tories

in terms of broad economic thought.

[T_i_B]

4. U.K. Growth Fueled by Jump in Government Spending

Trouble is, state spending has been the thing that kept the UK economy going when the private sector got credit crunched.

http://www.bloomberg.com/news/2010-09-28/u-k-grows-at-fastest-pace-in-nine-years-fueled-by-government-spending.html

The U.K. economy’s fastest quarter of growth in nine years was fuelled by rebounding consumer spending and inventories and the biggest jump in government spending since 2008.

Gross domestic product expanded 1.2 percent in the three months through June from the first quarter, unrevised from a previous measurement, the Office for National Statistics said today in London.

The International Monetary Fund yesterday cut its 2011 economic growth forecast for the U.K. and said the Bank of England should be ready to add more stimulus if the recovery falters. Britain faces the prospect of the biggest spending cuts since World War II to tackle its record budget deficit.

“The more the contribution of government now, the more we’re going to miss it when it’s taken away,” Peter Dixon, an economist at Commerzbank AG in London, said in a telephone interview. “We’re going to see much slower growth.”