The IMF analysis, included in its Fiscal Monitor published today, concluded that there would be a deficit in 2019 of 0.2% of gross domestic product. It confirmed that the deficit would fall from 4.1% of economic output this year to 2.9% in 2016 and then to 1.5% in 2017 and 0.4% in 2018.
By contrast, at the Budget in March, Chancellor George Osborne said he expected the public finances to run a surplus of 0.2% in 2018/19, and 0.3% in 2019/20.
The IMF said that its projections were based on the Treasury’s Budget data, but had been adjusted to reflect the body’s lower growth forecasts.
It has also assumed that following next month’s general election, the next government will undertake a slightly slower pace of deficit reduction than was set out by Osborne. The chancellor proposed large spending cuts in 2016/17 and 2017/18 before spending could be maintained in real terms in 2018/19 and then begin to grow in line with the economy the following year.
‘On the expenditure side, given uncertainties pertaining to the May elections, a slightly slower pace of consolidation than that in the Budget is assumed for fiscal year 2016/17 and beyond,’ the IMF stated.
In addition, the fund said its projections were also different because of the difference between the fiscal year and calendar year in accounting for transfers from the Bank of England’s quantitative easing programme.
