Will IMF’s Blanchard blanch?

George Osborne Mr Osborne stuck to his public spending cuts despite criticism from the IMF

Just nine months ago, the IMF's chief economist, Olivier Blanchard, warned Britain's chancellor of the exchequer that he was "playing with fire" by not easing the pace of public spending cuts, at a time when the UK's economy was flatter than the proverbial pancake.

George Osborne did not budge.

But the International Monetary Fund has. Its latest economic forecast shows the UK as the second fastest growing of the world's big developed economies - with only America, on the IMF's projections, set to grow faster in 2014.

What's more, the IMF may be forced to revise its projections for the UK higher still, because its forecast of 2.4% GDP growth in the current year is still below that of most economists.

The Bank of England, for example, expects a 2.8% rise in national income.

Embarrassing for the IMF?

A bit.

Not in the pink yet

But what some will see as perhaps piquant or amusing, this time the IMF would be seen by Mr Osborne as getting it wrong for being less hairshirt about fixing a hole in the public finances than he feels is necessary - when historically the IMF has been accused of being too hairshirt with highly indebted countries.

That said, not even Mr Osborne is today arguing that the UK economy is back in the pink.

His position is that the patient is recovering, but that a regimen of public expenditure cuts remains the order of the day (which will not warm the cockles of all).

And there is another thing (well a few things actually). To tell you what you may already know (I am making the heroic assumption that you have been paying attention):

1) too much of the UK's recovery is arguably based on consumption rather than investment, and is vulnerable to rises in interest rates,

2) there is a disturbing widening in the deficit between what we buy from the rest of the world and what we sell abroad, and

3) as yet, the growth is not feeding through to the pounds in our pockets, to our living standards.

Bumpy road to recovery

It would probably be a little presumptuous, or hubristic, to assume that we are back on a long journey of sustained and sustainable growth, and that there won't be bumps, deviations and reverses.

Oh, and unlike economies currently performing a good deal worse than ours - such as Germany's - UK GDP is still below its pre-crisis peak.

So it will be a few months yet before British national income is back to where it was in the first quarter of 2008, and rather longer before the disposable incomes of British people will have recovered to pre-Crash levels.

All that said, Britain's recovery is real and is the best we've experienced for years. Who's complaining?

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 271.

    @269. All for All "NO such help intended. Progres for some 'by accident'"

    Better real progress by accident than designed progress that never gets off the drawing board. There is little "comfort" in the figures, which say nothing of the rate of population growth or the distribution of incremental wealth within economies. But world trade is helping poorer nations (as expected, if not intended).

  • rate this

    Comment number 270.

    268 My slogan is "if it is all right for JR it is good enough for us"!

    Actually, of course, Dallas minimum distance to habitation regulation if applied here would likely stop all UK fracking.

    What this also means that the UK Government thinks that the health of all British people is worth so much less than that of a Dallas US citizen.

    That really paints the picture of UK Regulation!

  • rate this

    Comment number 269.

    Comfort in breakdown?
    Advanced+2.2%, Emerg/Develop+5.1%

    Tempting to suppose 'levelling-up', Advanced helping catch-up

    NO such help intended. Progres for some 'by accident', mobile capital ('ours') findng enough 'co-operation' (for exploitation of new lands & cheap labour) to make infrastructure & industrialisation 'worth providing' until home unemploy (ours) 'picks up'

  • rate this

    Comment number 268.


    I'm not a fan either - mainly because of the grossly over sold idea that the UK has regulation worthy of the name.

    My current campaign is to get regulation as good as The City of Dallas Texas. Not much to ask I would have thought regulation just as good as a major US oil city. - but it appears that it is.

    The one place we have regulation is in having no open waste bunds!

  • rate this

    Comment number 267.

    @266. All for All "percentages usually cannot / should not be averaged"

    Agreed! 3.7% is not the average GDP increase forecast; it is the forecast for the increase in World Output, the aggregate of all GDPs.


    Advanced Economies: +2.2%
    Emerging and Developing Economies: +5.1%
    (Developing Asia: +6.7%)
    (Sub-saharan Africa: +6.1%)


Comments 5 of 271



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