Cloud lifts over growth
SAJID Javid’s first visit to the International Monetary Fund as Chancellor could not be better timed.
By bringing with him details of Boris Johnson’s draft Brexit agreement with Brussels, he lifts one of the darkest clouds that have been hovering over the Washington meetings and the threat to global output this year and next.
All that is needed now is for the US and China to say they have sealed their trade deal, bringing a halt to new tariffs, and blockages to confidence on the markets, business and consumers will have been lifted.
Javid’s message is upbeat. Brexit will usher in a decade of renewal for the UK and the Government intends to take advantage of record low interest rates to support investment.
The combination of the business confidence unleashed if the Commons approves the Johnson Brexit agreement and an expansion-focused budget next month has the capacity to transform the UK’s modest growth prospects.
A deal also opens the path to the IMF going ahead with its delayed annual inspection of the British economy. Officials here decided that there was no point in doing their ‘Article 4’ detailed analysis of the state of the economy and finances until after October 31.
The Fund’s previous work suggests a much more benign outcome from an agreed Brexit – with growth of 1.4pc next year – than a lurch into a No Deal unknown. The IMF can be expected to deliver its report card well after the budget on November 6 and shortly before Christmas.
Ever since June 2016 we have heard nothing but gloom from the CBI, British Chambers of Commerce, car makers and other commercial groups.
Whatever the outcome of the IMF inspection, the suspicion must be that forecasters have greatly underestimated the psychological and confidence impact of the UK actually winning parliamentary approval for a Brexit deal.
The collective sigh of relief from business and consumers if a three-and-a-half-year uncertainty nightmare finally is erased will be felt across the world.
Changing the guard
LEADERSHIP at the IMF/World Bank has a new look at the 2019 annual meeting.
The new incumbent as IMF managing director is a Bretton Woods veteran. Former World Bank chief executive Kristalina Georgieva replaced Christine Lagarde last month. At the World Bank, Trump appointment – the lugubrious David Malpass – is now six months into the job, having replaced the loquacious Jim Yong Kim.
Georgieva breaks a pattern by being the first IMF boss to come from an emerging market country, Bulgaria, easing the grip of bigger EU nations and France in particular.
The old carve-up which allows the US to choose the World Bank president and the Europeans the managing director of the IMF remains intact. But this time around emerging markets did not cavil.
Georgieva faces real-world challenges, including the potential slide of the world into recession, bloody clashes in Ecuador after a badly implemented IMF programme and political and economic turmoil in Argentina, the fund’s biggest client. There are also complex problems in Ukraine, not helped by US domestic politics and the effort to impeach Donald Trump.
The IMF also had to give up on raising new capital through quotas, bigger shareholdings, and instead is going the official borrowing route. That is an irony given its current dire warnings about global debt levels.
Malpass is less focused on the big global ideas of his predecessor and is much more interested in a country-by-country approach to development. The exception is the World Bank’s new targeted and tested approach to learning, with league tables to be developed.
This fits right in with the work of Nobel economic prize winners Michael Kremer, Abhijit Banerjee and Esther Duflo. Neat.
Flight plan
AS THE High Street and newspapers have become less critical, WH Smith – with a heritage dating back to 1792 – has found itself a new 21st Century identity in travel. It is breaking the pattern of UK companies waiting to be bought by the Americans by turning the tables, spending £312m on Las Vegas-based airport retailer Marshall Retail Group. The deal should double the size of global operations. And guess what? Investors like the ambition.