Kudos to Osborne as IMF changes its tune on UK growth

The International Monetary Fund has upgraded its UK growth forecast but downgraded the global outlook. Gold star to the chancellor.

by Gabriella Griffith
Last Updated: 04 Nov 2013
It's not a dish he gets to enjoy very often, but George Osborne should be tucking into a steaming bowl of ‘I told you so’ for breakfast this morning. The IMF’s has performed a volte face, lifting the UK’s growth forecast just months after it warned the Chancellor to rethink his austerity strategy.
 
The IMF said it expected the UK economy to grow 1.4% in 2013, a leap from its July estimate of 0.9%, citing increased business and consumer confidence. (Maybe it spotted Monday’s story claiming confidence in the City is at a 17 year high). It also predicted 2014 to be rosier, forecasting growth of 1.9%, up from 0.9%.

One has to wonder about the strength of predictions from the IMF, looking at confidence as a barometer is a step up from wetting a finger and sticking it in the air. But we shouldn't complain.
 
It’s an about-turn for the fund, whose chief economist Olivier Blanchard told Osborne he was ‘playing with fire’ back in April before cutting the growth forecast for the UK and calling for more a more flexible approach to economic policy.
 
Yesterday, he said he was ‘pleasantly surprised’ the UK’s performance. We guess ‘I was wrong’ was a bridge too far.
 
Careful not to gush too much: the IMF said total recovery for the UK was still years away and said the government should consider hurrying infrastructure investments to hike growth further.
 
Shadow chancellor Ed Balls was delighted by this mild criticism, pointing out the recovery was still the UK’s slowest in 100 years.

‘That’s why the IMF has repeated its view that the Government should bring forward infrastructure investment now,’ he said.
 
For other nations, the news wasn't as optimistic; it downgraded the global growth forecast by 0.3% to 2.9% for 2013 and dropped it by 0.2% to 3.6% for the following year.

Slowing growth in emerging economies such as China, India, and Russia, has been blamed for the cut. The US Federal Reserve’s prospective stimulus trim is still impacting on interest rates in emerging economies.
 
The current standoff between US politicians is also a cause for concern. The IMF said if the United States does default on its debt payments, it could ‘seriously damage the global economy.’ No pressure, guys...
 
Meanwhile, the IMF added that things were slowly looking up in the eurozone – it expects 0.4% growth in the area this year and 1% in 2014 – thanks in large to a stabilising in Italy and Spain.

‘In short, the recovery from the crisis continues, albeit too slowly,’ said Blanchard.
 
‘The architecture of the financial system is evolving, and its future shape is still unclear. These issues will continue to shape the evolution of the world economy for many years to come.’

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