IMF warns on UK recovery
The UK’s economic recovery has stalled and will take longer than initially expected, according to the International Monetary Fund.
In a report released this afternoon
, the IMF predicts only modest growth with continued low confidence and high uncertainty about the UK's prospects. Shadow Chancellor Ed Balls called it a "very serious warning to the Chancellor" to take action on growth immediately.
The report warns that if the current strategy fails, spending cuts may need to be relaxed to prevent the risk of a “permanent loss in productive capacity”.
The report expresses concern that the pace of recovery will be insufficient to “absorb significant slack in the economy” under the current policies in place, given the current weak demand.
Despite this, it says that fiscal easing measures should focus on measures such as higher infrastructure spending, which would appear to support the Government’s recently announced plans to invest in UK rail infrastructure and provide guarantees and loans worth £50bn to help infrastructure investments.
The new study echoes the recent comments of Christine Lagarde, who suggested the Government needs to have a plan B for the economy, in arguing for a reduction in the pace of public expenditure cuts if signs of recovery are not seen soon.
There was another blow for the Government this morning, with news that UK retail sales grew by just 0.3% in month of June, the lowest figure since October 2009 and well below expectations. Analysts said the recent bad weather might have kept shoppers away from the high street.