The IMF slowly wakes up to economic reality

http://www.guardian.co.uk/commentisfree/2011/jun/06/imf-uk-fiscal-squeeze

Perhaps the best perspective on the IMF report on the UK economy is to be had by looking at what it said last time. Only last September, the fund's view was:

"The UK economy is on the mend. Economic recovery is under way, unemployment has stabilised, and financial sector health has improved. The government's strong and credible multi-year fiscal deficit reduction plan is essential to ensure debt sustainability. The plan greatly reduces the risk of a costly loss of confidence in public finances and supports a balanced recovery. Fiscal tightening will dampen short-term growth but not stop it as other sectors of the economy emerge as drivers of recovery, supported by continued monetary stimulus. Upside and downside risks around this central scenario of moderate growth and gradually falling inflation are balanced."

This was of course more than a little over-optimistic. And this is not selective quotation – this is the first five sentences of its statement then. Of course, forecasts are always wrong; but it is worth noting that the National Institute of Economic and Social Research's forecast, published very shortly after the last IMF report, said, "the recovery will continue but it will be sluggish", due to the impact of tightened fiscal policy and depressed consumer demand.

At that time NIESR forecast 1.6% growth for 2011; almost exactly what the IMF is predicting now.







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