Wednesday, May 22, 2013
Something for everybody in the IMF
Posted by David Smith at 02:30 PM
Category: Thoughts and responses

If diplomacy is the art of not causing offence, the IMF's annual Article IV assessment of the UK economy is a master-class in diplomacy. It allows the government to say it is already doing the things the IMF recommends and the opposition to attack ministers for not doing enough of them.

The IMF report, coming on the day of a sharp weather-related 1.3% drop in retail sales in April, is an antidote to some of the recent growth optimism. It notes that the recovery remains weak by past standards, and that per capita GDP is still 6% below pre-crisis levels.

Most of its recommendations are familiar - bring forward infrastructure spending, do more to get credit flowing, and so on. Buit as it concedes:

"Policy remedies to restore growth and rebalance the economy are not straightforward. Monetary policy is at the zero bound; bank balance sheets are impaired; and public debt is rising, but the consolidation to address this is also a drag on growth. This implies the need for a coordinated multi-pronged strategy to guide the economy to greater and more balanced growth. Such a package would bring growth benefits not merely to the UK, but would also have positive spillovers to the rest of the world, especially those who trade most with the UK."

So press lots of small buttons, but don't expect miracles. There is no magic bullet. The report is here.

The other significant announcement today was a downward revision of 2012-13's public sector net borrowing to 119.5 billion, implying a bigger margin of reduction over the 2011-12 figure of 120.9 billion.