UK recovery strong but has lost momentum – IMF

The IMF's Olivier Blanchard said stagnation is still a risk. Picture: AP
The IMF's Olivier Blanchard said stagnation is still a risk. Picture: AP
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THE British economy grew less than expected last year, even though it remains in the vanguard of growth in advanced economies, the International Monetary Fund said yesterday.

The IMF cut its global growth forecasts for 2015 against the backcloth of China’s still rapid expansion slowing last year to its weakest pace in more than two decades.

Latest estimates from the organisation said that the performance of most major economies had fallen short of expectations last year – including Britain, which it said grew 2.6 per cent rather than the previously predicted 3.2 per cent.

The IMF World Economic Outlook maintains its forecast for British growth this year at 
2.7 per cent, but cut its 2016 figure by 0.1 percentage points to 2.4 per cent.

Christine Lagarde, managing director of the IMF, recently praised Britain’s recovery, saying that the country could become a focus of relative strength in a mixed global macro-economy.

Yesterday’s report cut world growth forecasts by 0.3 per cent to 3.5 per cent in 2015, and 3.7 per cent in 2016, saying that weakness in developed countries would offset the advantages of the sliding oil price.

It came as China posted gross domestic product (GDP) expansion of 7.4 per cent in 2014, its weakest pace since 1990, although no worse than expected.

The IMF said that its gloomier world outlook also reflected prospects in Russia, the eurozone and Japan. Only the United States had performed ahead of expectations.

Olivier Blanchard, IMF chief economist – who warned Chancellor George Osborne about Britain’s austerity programme in 2013 – said: “The most obvious risks involve stagnation in the eurozone, or Japan, or both.”

He said the plunge in oil price – down by more than half since September – had created a “complicated mosaic”, with some countries gaining from the oil price slump and others facing smaller tax and export revenues. Big energy exporters include Russia, Nigeria and Venezuela, while major importers include India and Japan.

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