Chancellor George Osborne’s plans to eliminate the budget deficit by 2020 received a thumbs up from the International Monetary Fund (IMF) yesterday.
While some have argued that his aim to balance the state books is a risk to the UK’s economic recovery, the IMF said that sustainable growth would require moving away from public support toward growth in the private sector.
Further growth could also be achieved by trying to boost demand for British goods from abroad, the IMF said.
The UK could look toward investing more in skills and public infrastructure to boost productivity, which would help British exports compete with those of other countries. This would reduce the trade deficit.
“Sustaining a strong and durable recovery in the UK requires rebalancing away from public support toward private sector-led demand, along with greater reliance on external demand,” the IMF said.
However, some economists say the trade deficit is predominantly due to weak demand from abroad, where economies have struggled to grow, and strong demand from the UK for foreign goods.