Humiliating U-turn by forecasters who never get it right
THOSe doom-mongers at the international Monetary Fund have once again forced to perform a humiliating u-turn in the face of the continuing resilience of the British economy.
Six weeks after ordaining the UK as the basketcase economy of the G7, it has dramatically reversed its verdict.
Having spent a fortnight scrutinising the performance of every economic sector, IMF officials now judge that Britain will avoid the recession they had earlier predicted, with growth this year at 0.4 per cent — a 0.7 per cent upgrade on its previous projection.
The IMF’s withering assessment of Britain’s economic prospects earlier in the spring was a political gift to the Labour Party and its fellow travellers in the media who delight in talking Britain down.
The change of heart represents a major victory for Chancellor Jeremy Hunt, who publicly chastised the US-BASED economic monitor for its downbeat UK projections.
The IMF concedes that, despite the Bank of england’s failure to get on top of inflation, consumers and business have shown ‘ higher than expected resilience’ with stronger demand and improved confidence.
Such optimism is a repudiation of the position taken by Labour leader Sir Keir Starmer and his Shadow Chancellor rachel reeves, who never tire of wallowing in gloom over the airwaves — discouraging business investment and unnecessarily worrying consumers. Yet despite his potentially damaging statements, Starmer has made much of one of his core missions: to make the UK the fastest-expanding economy in the G7.
That may be beyond the immediate capability of any British government but, with the help of some well-timed tax cuts, there is no reason to think rishi Sunak and the Tories should not go into the next general election with the economy growing, inflation falling sharply and near full employment.
The IMF’s new-found optimism over our economy, despite the energy crisis caused by russia’s war in ukraine, is supported by other data.
The services purchasing managers’ index, which reflects output in Britain’s services sector, slowed slightly in May but, buoyed by a surge in orders and rising business confidence, it has been in strong growth territory for four months in a row.
The concern now, however, is that the economy’s ‘growth spurt’ might make it harder to win the battle against inflation as prices are driven upwards.
unimpressed by Bank governor Andrew Bailey’s efforts to bring down inflation, the iMF forecasts that it may take until mid-2026, six months later than expected, to bring the consumer price index back down to the 2 per cent target. it calls on the Bank to focus on wage growth and services.
Britain has one of the strongest service sectors in the world, driven by the earnings of the City of London, the life sciences industry – which embraces biotech and pharmaceuticals – and the creative sector.
There is certainly more that could be done. The iMF recommends the government gets full square behind uK tech and science by reconnecting with Horizon europe, the eu’s science and innovation project, and by providing more financial support for research and development.
Confidence in Britain at home and overseas has been undermined since november 2022 when the Bank of england predicted the uK would face the longest recession in its history. Since then, both the Bank and the iMF have been forced into embarrassing climbdowns on their wayward forecasts.
Once again the uK economy has confounded the sceptics.