Annals of Austerity

The IMF boosts its UK outlook, and the government says it’s thanks to austerity

April 8, 2014
April 8, 2014

British government ministers are sporting smug expressions and an extra spring in their steps today. The IMF’s latest forecast is great news for the government, as the UK’s GDP growth this year is expected to top the G7 table.

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Don’t think that British pols have been shy about taking credit for it.

This was only the latest in a series of upward revisions to UK growth by the IMF, which over the last year has roughly doubled its forecast for 2014 growth.

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All this will make Chancellor George Osborne smugger than most, given that he waged a war of words over the value of fiscal austerity with the Olivier Blanchard, the IMF’s chief economist, throughout much of last year. In the IMF’s economic assessment in April last year, Blanchard said that the government’s austerity-heavy policies were akin to “playing with fire.”

Now the economist admits the IMF had “clearly under-forecast” UK growth, with the IMF citing “easier credit conditions and increased confidence” as the drivers of Britain’s buoyant economy. Osborne could be forgiven for a bit of triumphalism, but he is expected to go easy on the “I told you so” message in a speech at the World Bank and IMF’s spring meeting later this week, according to the Financial Times.

One reason the chancellor might want to refrain from too many triumphant tweets is that the value of austerity hasn’t been proven beyond any doubt. Osborne expects to put the public purse back in the black by 2019. The IMF expects the deficit to persist at least until then — and that the ratio of government debt to GDP will only start to fall in 2017.

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From house prices to auto sales to factory output, there is no denying that the UK economy is humming. The government’s steadfast commitment to austerity may have had something to do with it, but one thing this hasn’t yet done is actually reduce its debt.

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