THE government would have to revisit its plans for deep spending cuts if growth substantially disappoints, the International Monetary Fund warned yesterday.
Speaking at the launch of the agency’s World Economic Outlook report, which cut the UK’s projected rate of growth from 2.1 per cent to two per cent, the fund’s chief economist Olivier Blanchard said the UK’s plans would have a negative impact on growth.
The comments contradict the IMF’s recent report praising the government’s plans to slash spending, and Blanchard said the warning on cutting too much, too fast applied to all advanced economics, not just the UK.
The IMF reduced its forecast for world growth next year from 4.3 per cent to 4.2 per cent and warned that the global recovery could fizzle out. It highlighted the dangers associated with yawning public sector pensions stretching finances to breaking point.
The IMF’s report came as the head of the World Bank praised the government’s determination to cut Britain’s huge debt, saying that its actions were “courageous and wise”.
Robert Zoellick said that the debts carried by many countries after the economic crisis would potentially sow the seeds of a future crisis.