The International Monetary Fund (IMF) have lifted the UK’s economic growth forecast for 2013 0.3 percentage points to 0.9 per cent – the first time it has raised a UK forecast since April 2012 (release).
In April this year, the IMF cut its forecast for UK growth from 1.0 per cent, prompting criticism of the policies of chancellor George Osborne. This latest revision should have been a clear victory for Osborne, particularly in light of less than encouraging figures on industrial and manufacturing production released this morning.
But speaking at a press conference, division chief of the IMF's World Economic Studies Thomas Helbling said that the main reason for the revision of UK growth in 2013 was actual data from the first quarter, where domestic demand was stronger. However, he doesn't think it changes "the big picture" for the UK, namely, that "the recovery is weak".
Shadow chancellor Ed Balls jumped at the chance to take a dig at his Tory equivalent.
These forecasts confirm that, after three years of flatlining, the IMF believes Britain's economic recovery will remain weak. While this year's figure has been revised up, it is disappointing that this is still a lower forecast than the IMF was making at the start of this year.
And the IMF's advice to George Osborne remains unchanged. As they said just a few weeks ago, Britain is a long way from a strong and sustained recovery and so the government should bring forward infrastructure investment right now to create jobs and growth.
The upwards revision for the UK comes as the IMF cuts its forecast for global growth by 0.2 percentage points to 3.1 per cent, citing “appreciably weaker domestic demand and slower growth in several key emerging market economies, as well as by a more protracted recession in the euro area. It also revised its 2014 forecast down from 3.9 per cent to 3.7 per cent.
Downside risks to global growth prospects still dominate: while old risks remain, new risks have emerged, including the possibility of a longer growth slowdown in emerging market economies, especially given the risks of lower potential growth, slowing credit, and possibly tighter financial conditions if the anticipated unwinding of monetary stiumulus in the United States leads to sustained capital flow reversals.
Echoing assessments made by Fitch Ratings last month, the IMF estimates slower growth in the BRIC countries – Brazil, Russia, India and China. The euro area is projected to remain in recession in 2013, with growth contracting by 0.6 per cent (revised down from -0.3 per cent). However, it is expected growth will rise to just under one per cent in 2014.
The US had its 2013 and 2014 growth forecasts revised down 0.2 percentage points to a respective 1.2 and 2.1 per cent. Japan is expected to expand by two per cent this year (revised up 0.5 per cent) and 1.2 per cent in 2014 (down from 1.5 per cent).
World trade volumes are expected to increase by 3.1 per cent in 2013 (revised down 0.5 per cent) and 5.4 per cent in 2014 (up from 5.3 per cent).
Source: BBC News
When the results were released, the pound fell to a three-year low against the dollar to $1.4814.