Government’s plan A given IMF approval
THE INTERNATIONAL Monetary Fund (IMF) has said there is no need for chancellor George Osborne to slow his deficit reduction plans, or for Britain to draw up a “plan B” for the economy.
“The weakness in economic growth and rise in inflation over the last several months was unexpected. This raises the question whether it is time to adjust macroeconomic policies. The answer is no as the deviations are largely temporary,” the IMF’s annual report on the UK economy said.
Shadow chancellor Ed Balls had called for a change in economic strategy, blaming the government’s approach for sluggish growth and job losses.
But the IMF said the government should maintain its current course of deficit reduction and monetary policy, only considering an alternative if there is a “prolonged period of weak growth and high unemployment”.
The economy is likely to grow by around 1.5 per cent this year before achieving growth of about 2.5 per cent in the medium term, the IMF estimated. But it acknowledged that there were major risks to this outlook, as for all big economies.
George Osborne welcomed the IMF’s annual economic assessment, which comes after he dismissed criticism from more than 50 left-leaning economists over the weekend that his plans risked derailing economic recovery.
If the economy grew as expected, the government and Bank of England policy looked about right, the IMF said.
“We consider the current deviations from forecast represent temporary factors and that the current policy mix strikes us as appropriate,” IMF acting managing director John Lipsky told a news conference after the report was published.
But the IMF also said tax cuts and other measures may be needed if growth proves persistently weak.
Lipsky said unemployment remained “unacceptably high” and encouraged the government to press ahead with increasing the retirement age and cutting public sector pensions to boost the economy.