IMF cuts growth forecast for UK for 2011 and 2012
- 20 September 2011
- From the section Business
The International Monetary Fund has cut its growth forecasts for the UK, in a report warning that the global economy is in a "dangerous new phase".
UK gross domestic product is predicted to grow 1.1% in 2011, down from the 1.5% forecast in the IMF's previous World Economic Outlook report in June.
The growth forecast for 2012 has been slashed from 2.3% to 1.6%.
Foreign Secretary William Hague said the UK had the "discipline and determination" to tackle its deficit.
But shadow chancellor Ed Balls called them "deeply concerning forecasts for both the UK and world economy".
Independent economists are currently forecasting average UK growth of 1.3% in 2011, slower than the IMF, and 2% in 2012, ahead of the IMF figure.
The IMF's UK forecast for 2011 falls behind projections for Germany, France, the US and Canada.
Germany is forecast to grow 2.7% in 2011 while France is expected to show 1.7% growth. The US should advance 1.5% and Canada 2.1%.
However, UK growth in 2012 should surpass both Germany and France, whose forecasts have been cut to 1.3% and 1.4% respectively.
A spokesman for the Treasury said the Government remains committed to its deficit cutting plan.
He said: "It is welcome that the IMF have forecast that the UK will grow more strongly than Germany, France and the euro-zone next year.
"But it is clear that the UK is not immune to what is going on in our biggest export markets, with every major economy seeing lower forecasts for growth this year and next.
"The Government remains committed to implementing the deficit reduction plan which has delivered stability, a policy stance that Christine Lagarde described as 'appropriate' earlier this month."
Mrs Lagarde, head of the IMF, said the UK's budget deficit stance remained "appropriate" but "the heightened risk" meant a need for a "heightened readiness to respond".
Mr Hague said that the state of the global economy was a cause for concern so the downgrades to the UK and other countries' growth forecasts was expected.
"The important thing is that we have put ourselves in a position to restore health to our national finances," he said.
Labour's Ed Balls urged action: "Our chancellor and political leaders in Europe need to wake up to the scale of the problem."
In its report on Tuesday, the IMF said: "The global economy is in a dangerous new phase. Global activity has weakened and become more uneven, confidence has fallen sharply recently, and downside risks are growing."
And TUC general secretary Brendan Barber said the growth downgrade was "a further blow to the Government's economic credibility" and called for the Chancellor to look for alternatives to his austerity measures.
He said: "Calls for a plan B are growing. The Chancellor must change course before he causes even more damage to the economy."