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IMF expects strong economic growth in the UK despite international concerns

The International Monetary fund is expecting the UK economy to continue to grow strongly, maintaining its July forecasts of 3.2% growth this year and 2.7% next year.

However, the IMF has cut its forecast for global economic growth for both this year and next and warned the recovery is “weak and uneven”.

It is now forecasting 3.3% for international growth this year, down from its forecast in July of 3.4%. Next year, it predicts 3.8% growth, against an earlier prediction of 4.0%.

The reductions reflect international concerns regarding the eurozone, Russia, the Middle East and Japan.

However, the fund said Europe was experiencing a “multispeed recovery” and downgraded its growth forecasts for Germany, France and Italy stating that progress was still “slow and tentative” in many countries.

The IMF expects monetary policy normalization in the United Kingdom to begin in the first half of 2015. However, in the euro area and Japan, it retains very accommodative policy stances.

The IMF has also sharply upgraded its outlook for the US this year, by 0.5% to 2.2%, saying the weakness at the beginning of the year was due to “mostly temporary” factors.

The report states: “In the UK, activity has rebounded and become more balanced, driven by both consumption and business investment, thanks to improving credit and financial market conditions and healthy corporate balance sheets.

“Growth is projected to average 3.2% in 2014 and 2.7% in 2015, about 0.25% stronger than forecast in the April WEO.

“House prices are increasing at a strong pace, and have also been buoyant in other advanced economies including Canada, Norway, Sweden and Switzerland.

IMF chief economist Olivier Blanchard said: “This number hides very different evolutions. Some countries have recovered or nearly recovered. But others are still struggling.”

This was posted in Bdaily's Members' News section by Ellen Forster .