However, the IMF said that the UK has a strong fiscal framework and the overall tone of the global review was broadly positive. Among the challenges to growth are rising oil prices, political unrest in the Middle East, continuing inflation in China and debt problems across Europe.
The forecast for the UK’s recovery over the next two years is similar to other large, advanced economies but the USA, Germany and most of the Scandinavian countries are expected to grow quicker, although the USA’s forecast for this year has been cut as well. And it does look as though the threat of a double-dip recession has abated.
In the UK, the cuts in public spending, brought in as part of the package to tackle the deficit, are expected to slow growth down but the IMF approves of them as a fiscal measure. It says that the “necessary front-loaded fiscal consolidation” will dampen domestic demand and that governments with half-hearted public spending cuts were undermining efforts towards longer-term sustainable growth.
The outlook for the rest of the year in the UK is that there will be rising unemployment, particularly for younger people. “Unemployment poses grave economic and social challenges, which are being amplified in emerging and developing economies by high food prices," the review says.
Unemployment for Britain’s 16 to 25 year old may well tip over the million mark when the figures are published tomorrow.
The forecast for next year remains unchanged at 2.3 per cent, which almost matches that of the Office for Budget Responsibilities at 2.5 per cent.
For more information, please visit www.twpaccounting.co.uk
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