IMF urges the UK to implement new growth measures to stimulate the economy

(Source: Reuters)

*IMF's David Lipton unveils report at HMT

The IMF has released its report on the UK's recovery, saying that there are "nascent signs of momentum" and that the IMF remains concerned about the economic situation. This is in stark contrast to the support given to the UK's economy policy in 2011, while also not offering strong critiscism.

Unveiling the report, the IMF's David Lipton said that the UK needs more forecful action on monetary policy, fiscal, financial and structural reform, saying that "within medium term objectives it would be useful for the economy for infrastructure and other measures to reduce fiscal drag in this year". However, he noted that higher fiscal support was not a straightforward choice as the UK's fiscal deficit is already high.

Notwithstanding the recent uptick in activity, per capita income remains 6 percent below its pre-crisis peak, making this the weakest recovery in recent history.

Of particular concern is that capital investment (as a share of GDP) is at a postwar low, and that youth unemployment is high.

Pointing to low borrowing costs, the IMF believes that the UK had more room to act. While the report does not include calls to reduce the pace of fiscal consolidation "further modifying the composition of consolidation to boost growth" was suggested. Chancellor George Osborne could try "reducing marginal effective corporate tax rates" or "introducing tax allowances for raising equity".

The report suggested that "the effectiveness of monetary policy would be enhanced if it were supported by other policy measures" while adding that the UK's banks have still not been restored to health.