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IMF comments on potential of UK growth

Tuesday August 2nd, 2011

According to the International Monetary Fund (IMF), the UK economy will ‘pick up’ in the coming quarters but warned the government must be careful if estimated growth and inflation figures are not achieved. 

The IMF also says that British households would lose about £35bn in disposable income for the next five years, pointing out that tax cuts may be needed to stimulate growth.

The annual report on the UK’s economy also pointed out that the government might have to increase taxes or undertake another round of spending cuts in order to meet its fiscal consolidation targets.

The IMF believes there is a larger structural deficit in the economy than the OBR and also disagrees on the ‘spare capacity’ in the economy.  The IMF believes there is only 2.75% spare capacity in the economy compared to OBR’s 4% and as a result expects a ‘slower potentical growth rate’.

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