By: DailyForex.com
The International Monetary Fund (IMF) conducts missions to its member states usually on an annual basis in accordance with its article 5 obligations. The IMF has just concluded a visit to the UK and has reported on its findings. The headline view was that for the the UK economy: “activity appears to be improving, but a slow recovery remains likely”.
The IMF report calls for a change of emphasis in the UK economy by slowing the pace of the austerity measures. The report notes that the UK economy remains a long way from its goal of “a strong and sustainable recovery”. The authors of the report conclude that government measures to reduce the structural deficit (resulting from long-term spending imbalances) are acting as a drag on the economy. The report goes on to highlight measures that it thinks could be applied to offset some of the negative impact of the cuts by increasing expenditure on infrastructure in the country. They argue that their proposals would not affect the medium-term fiscal framework already outlined by the government.
Speaking at a Press Conference, David Lipton, a deputy director of the IMF said: "We're suggesting that within the multi-year medium-term framework that the government has laid out that it should advance infrastructure spending to provide more support for the economy. "But that said... one has to evaluate the impact on policies on the economy as you go so whether the present medium-term framework turns out to be an appropriate one when measured next year or the year after remains to be seen."
The UK government had won international credibility with its austerity program, in the view of the IMF, but believe that the economy could be strengthened by slowing the pace of the cuts.