UKOct 10 2017

IMF says UK is exception to global growth

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IMF says UK is exception to global growth

The International Monetary Fund has singled out the UK as a “notable exception” to global growth picking up.

In its twice-yearly World Economic Outlook, the IMF predicted that the UK would grow by 1.7 per cent in 2017 and then 1.5 per cent in 2018.

Earlier this year the IMF cut Britain’s growth expectations for 2017 by 0.3 per cent to 1.7 per cent – a prediction which has remained unchanged.

Every other advanced economy has had its growth predictions for this year revised upwards and the UK is now predicted to grow more slowly than the Euro Area, which is forecast to see 2.1 per cent growth in 2017.

The IMF stated: “Among advanced economies, domestic demand and output grew faster in the first half of 2017 than in the second half of 2016.

“In the US, weakness in consumption in the first quarter turned out to be temporary, while business investment continued to strengthen, partly reflecting a recovery in the energy sector.

“In the Euro area and Japan, stronger private consumption, investment and external demand bolstered overall growth momentum in the first half of the year.

“Growth in most of the other advanced economies, with the notable exception of the UK, picked up in the first half of 2017 from its pace in the second half of 2016, with both domestic and external demand contributing.”

This slowdown, the IMF said, is driven by softer growth in private consumption as the pound’s depreciation weighs on household real income.

The IMF stated: “The medium-term growth outlook is highly uncertain and will depend in part on the new economic relationship with the EU and the extent of the increase in barriers to trade, migration, and cross-border financial activity.”

The UK is also the exception among advanced economies when it comes to inflation.

According to the IMF many other advanced economies, including Australia, Canada, Denmark, South Korea and Norway are experiencing weak inflation pressure.

But the UK has seen higher consumer prices as a result of the depreciation in sterling following last year’s EU referendum.

The IMF is predicting “moderate fiscal tightening” in the UK as well as Japan.

damian.fantato@ft.com