THE UK economy will expand by just 1.75 per cent this year, the International Monetary Fund (IMF) has predicted – down sharply from January’s forecast of 2.1 per cent.
Growth is still expected to spring up to 2.3 per cent the following year, according to the IMF’s latest World Economic Outlook, released yesterday. The forecast for world output is unchanged, at 4.4 per cent growth.
While the British economy will take a hit from the planned fiscal consolidation, the IMF described the cuts as “necessary”, and criticised other countries for failing to rein in their public finances.
“The pace of ﬁscal consolidation in 2011 will be far below earlier estimates,” the report said.
In October last year the IMF expected average structural deficit reductions of one per cent of GDP, yet now expects just 0.25 per cent of GDP in deficit cuts.
The structural deficit in the US, which is now projected to widen in 2011, is largely to blame, the report said.
“Its economy appears sufficiently strong to withstand modest consolidation,” the IMF said, arguing that the impact of the stimulus package is “likely to be low relative to its cost”.