It was reassuring to hear the International Monetary Fund (IMF) endorsing moves by the UK Government to cut public spending.
They have concluded that the UK economy is “on the mend”. After reading last week that the Irish economy looks set to return to recession, this can only be considered as positive news.
The IMF assessment is that the coalition government moves to cut public spending will support a “balanced recovery”. They have forecast economic growth of 2% in 2011, rising to 2.5% in the medium term.
Another important forecast from the IMF is their view that inflation should fall back below the 2% government target by early 2012. They believe that the VAT rise scheduled for January will keep inflation above target during next year, before it starts to fall the following year.
The IMF assessment of UK economic prospects was not without its warnings.
They do go on to warn of big downside risks. These include continued fragile confidence, weakness in the housing market and a greater impact than expected from spending cuts.
With the coalition government approach to spending cuts once again in the spotlight, following the election of Ed Miliband to the position of Labour party leader, it must be satisfying for Cameron and Clegg to get such a big vote of confidence from the IMF.
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