In its latest World Economic Outlook, published yesterday, the IMF revised up its projection for 2013 by 0.5 percentage points compared to its July forecast. It also increased the growth prediction for 2014 by 0.4 points to 1.9%.
According to the IMF, recent data has shown ‘welcome signs of an improving [UK] economy, consistent with increasing consumer and business confidence’.
However, it added that overall output, which remains lower than it was before the financial crisis, would stay below potential for many years.
The IMF also stated there was room for the government to bring forward infrastructure investment.
‘In an environment of still low interest rates and underutilisation of resources, public investment can also be brought forward to offset the drag from planned near-term fiscal tightening, while staying within the medium-term fiscal framework.’
The WEO called on the Bank of England to continue with loose monetary policy of low interest rates and quantitative easing.
Better coordination was also needed between the financial regulatory authorities established earlier this year. The new supervisors – the Financial Policy Committee and the Bank of England’s Prudential Regulation Authority– must be both adequately resourced and operationally independent.
Responding to the report, the Treasury said the IMF’s revision showed the government's economic strategy was working.
A spokesman said: ‘But risks to the global economy remain high, and the recovery cannot be taken for granted. That is why the government will not let up in implementing its economic plan.’
Shadow chancellor Ed Balls said that although there was now growth in the economy, the recovery remained the slowest for 100 years.
‘Despite these welcome changes to its forecasts, the IMF rightly warns that the UK economy will remain below potential for many years. That’s why the IMF has repeated its view that the government should bring forward infrastructure investment now, which could be used to build thousands of affordable homes.’
