— IMF World Economic Outlook Says UK Will “Continue To Struggle”
— IMF Downgrades 2011 GDP Forecast To 1.1% vs 1.5%
— IMF Downgrades 2012 GDP Forecast To 1.6% vs 2.3%
LONDON (MNI) – The International Monetary Fund has downgraded its
forecast for UK GDP growth in 2011 and 2012 and called on the coalition
government to slow its current deficit reduction plans if growth
disappoints and borrowing costs hold around historic lows, according to
its latest World Economic Outlook report.
The fund cut its 2011 growth forecast to 1.1%, down from the 1.5%
it forecast as part of its final Article IV Consultation paper. The IMF
also reduced its estimate for growth in 2012 from 2.3% to 1.6%, implying
that the UK will not enjoy a rapid bounceback from the
slower-than-previously-expected growth in 2011.
The IMF forecast that the UK CPI rate would average 4.5% this year,
before falling to 2.4% in 2012.
The report says that both the UK and Germany should slow deficit
reduction plans if their growth rates undershoot current forecasts and
borrowing costs remain low.
“If activity were to undershoot current expectations, countries
that face historically low yields should also delay some of their
planned adjustment (Germany, the United Kingdom),” the report said.
The comments on slowing the pace of deficit reduction are more
explicit than earlier warnings from IMF managing director Christine
Lagarde’s that both the Treasury and the Bank of England should be
“nimble” when faced with downside risks to the economy.
The report marks the IMF’s third downward revision of its forecast
for UK growth in 2011.
Last week, the European commission cut its 2011 growth forecast for
the UK to just 1.1%, as it warned that activity across the eurozone
will judder to a halt by the end of the year.
The IMF growth forecast for 2011 is well below the implied forecast
in the BOE’s latest Inflation Report, of 1.7%.
–London newsroom 0044 207 862 7491; email:ukeditorial@marketnews.com
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