The International Monetary Fund (IMF) has surprisingly lowered its UK economic forecast, saying the coronavirus has a “case” for higher Treasury spending to deal with second-wave losses.
The latest resort lenders have used its annual review of the UK economy to judge that gross domestic product (GDP) will decline by 10.4% this year.
Exactly fifteen years ago the latest world economic outlook for this fund estimated a 9.8% hit.
The report blames “second-wave headwinds” for this adjustment, as well as cuts the outlook for growth in the 2021 period from 5.9% to 5.7%.
Its report warns that its projected risks to lower incomes will consistently keep unemployment and low productivity growth at 3% -6% of GDP compared to the pre-epidemic trend in the medium term.
It said the lack of a trade agreement with the EU would be at risk once the Brexit transition was over.
The review found that there was room for additional government spending to support activities as local COVID-19 Restrictions are tightened and the economy emerges from the constraints imposed on it.
It ended a month ago when Chancellor Ishii Sunak outlined his spending plans for next year.
He is already under pressure to sweeten his support for employers and their employees in anticipation of rising unemployment when the Farlogo scheme expires at the end of the month – replaced Job Support Scheme.
Kristalina Georgieva, managing director of the IMF, said: “My main message today is that continued policy support is essential to tackle the epidemic and to sustain and enhance recovery.
“We welcome the fact that the authorities are committed to providing it as long as it is needed to raise expectations and confidence.
“There is room for policy to do this,” he added – reiterating the message he gave in an exclusive interview with Sky News 12 days ago that it had happened. There is no time to raise taxes Or cutting costs to account for the record level of orrow in peacetime
He told reporters that public financing should not be avoided but only then should “the private sector happen after proper evaporation.”
Mr Sunak, who attended the video event to begin the review, said the report supported his policy package to date and warned that future action was needed to reduce future adoption.
He said: “Make it clear to me what the fund is saying today. It is right to support the economy in the short term, but over time – and in keeping with other big economies – we must bring public money back in a sustainable way.”