The IMF’s chief economist has urged Chancellor George Osborne to consider easing off on some of his planned austerity measures, as UK economic growth remained sluggish.
Olivier Blanchard told Radio 4's Today programme on Thursday that the state of the British economy had clearly deteriorated a fact that had led the fund to revise down its forecasts for UK growth to 1pc this year.
He suggested that the forthcoming March Budget would be an opportune moment to ‘take stock’.
‘We said that if things look bad at the beginning of 2013 – which they do – then there should be a reassessment of fiscal policy,’ he said. We still believe that. You have a budget coming in March and we think this will be good time to take stock and see if some adjustments should now be made.’
‘We've never been passionate about austerity. From the beginning we have always emphasised that fiscal consolidation should be slow and steady,’ he said.
Blanchard added that “slower fiscal consolidation in some form may well be appropriate – the exact numbers I don’t know - that has to be worked out.”
But speaking in Davos this morning, Prime Minister David Cameron robustly defended the Government’s economic record:
‘How do we succeed when other nations are growing, changing, innovating so fast? A lot of the answers are clear. Deal with your debts. Cut business taxes. Tackle the bloat in welfare. And crucially: make sure your schools and universities are truly world class.’
‘In the UK we've been doing all these things. Less than three years in and we've cut the deficit by a quarter. Our corporation tax rate is the lowest in the G7.’
The IMF has downgraded its expectations for UK growth to just 1.9% in 2014, compared with the 2.2% previously predicted.
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