IMF praise for UK recession plan

IveSeenTheLight

from http://news.bbc.co.uk/1/hi/business/8059861.stm


The UK government response to the global financial crisis has been "bold and wide-ranging," the International Monetary Fund (IMF) has said. It added that "aggressive action" by the government succeeded in containing the crisis and avoiding a breakdown.
But it warned that high levels of household and bank debt meant the pace of any recovery was still uncertain.
And it urged the government to adopt more ambitious plans to reduce the huge scale of government borrowing.

It remains to be seen whether the recent efforts to recapitalise the banks will be sufficient to sustain credit provision at a level required for a robust economic recovery


IMF



UK recession tracker
Bank predicts slow recovery


The IMF is sticking to its forecast that UK GDP will decline by 4.1% this year, compared with the chancellor's forecast of about 3.5%.
It said that the UK economy would contract at a decelerating rate in the near-term, but that the financial system was "still under stress" and that the UK economy remained "susceptible to potential shocks", with the sharp increase in public sector borrowing one of the key vulnerabilities.
"It remains to be seen whether the recent efforts to recapitalise the banks will be sufficient to sustain credit provision at a level required for a robust economic recovery," it added.
In response, the Treasury said it noted "the scale of the challenges" and accepted that "restoring the flow of credit to the economy will be crucial to building and supporting the recovery".
Vulnerable consumers
The IMF also noted that consumers were unlikely to return to their high-spending ways any time soon.
"Faced with falling house prices, significant reductions in the value of pensions and other assets, a deteriorating and uncertain employment outlook, consumers are likely to retrench spending to reduce debt and rebuild savings," it warned.
It said the speed and strength of the recovery was highly uncertain, "given the unprecedented nature of the crisis and the importance of confidence effects".
The IMF added that the depreciation of the pound could aid the recovery by shifting demand to domestically produced goods and services.
But it said that the UK had a "particular exposure" to global shocks because of its large financial sector, overheated property markets, high household indebtedness, and strong cross-border links.
And it warned that there was a need for "greater international coordination" in the event of a crisis involving a major international bank with strong cross-border links.
Andrew Smith, chief economist at KPMG, said the IMF was "right to be cautious in its outlook for the UK economy."
"Distressed consumers may prefer to save and pay down debt and businesses are in no mood or position to invest, so continued expansionary fiscal and monetary policy will be necessary to underpin demand," he added.
Public borrowing
The IMF wants the chancellor to spell out in more detail how he intends to return the public finances to a sustainable downward path.
It suggested that spending cuts were "more durable" than tax rises in reducing public borrowing over the long term, and said that a "broad public consensus" was needed on making a "sizeable fiscal adjustment".
But Robert Chote, the director of the independent Institute for Fiscal Studies, said that "experienced Whitehall hands fear it will be very difficult to achieve even the spending plans in the Budget, let alone more ambitious ones" and it will be difficult for the next government to avoid raising taxes.
The IMF also urged the Bank of England to expand its programme of credit easing by purchasing more private sector debt, as opposed to its current focus on buying up government debt.
But it warned that "at a more fundamental level, the public's confidence in the Bank of England's operational independence remains contingent on the state of the public finances."
Meanwhile Mr Darling re-affirmed his growth forecast and said in a newspaper interview that he still expected to economy to begin to recover by the end of the year.
"I am not going to change my forecast. I remain confident that the we will see a return to growth by the end of the year," he said.

inspector_monkfish

S&P have just revised UK outlook to 'NEGATIVE' :eek:

purch

"bold and wide-ranging,"

i.e. Chucking Loads of (newly created) Money at it, without a moments thought about how it is going to be repaid !!!!!

Cannon_Fodder

IveSeenTheLight wrote: »

"bold"

Cut to Jim Hacker, whose political antennae twitch, then his face turns from pride to concern, at the thought of being called "bold"...

...shorthand for 'brave and courageous'?

1984ReturnsForReal_2

"bold and wide-ranging,"

purch wrote: »

i.e. Chucking Loads of (newly created) Money at it, without a moments thought about how it is going to be repaid !!!!!

Thoughtless & rash


:rolleyes:

Davesnave

Might it not have been bolder to have done the other thing?

I don't see anything 'bold' in shelling out billions which will hit future generations, then being told by the electorate to bug ger off, which is what they know will happen shortly.

Generali

Standard and Poors disagree (although it feels a little like linking to The Daily Star's business pages:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aFy7olAsHDQU&refer=home

May 21 (Bloomberg) -- Britain may lose its AAA credit rating for the first time as government finances deteriorate in the worst recession since World War II.
Standard & Poor’s lowered its outlook on Britain to “negative” from “stable” and said the nation faces a one in three chance of a ratings cut as debt approaches 100 percent of gross domestic product.......

Britain needs to sell a record 220 billion pounds ($344 billion) of bonds in the fiscal year through March 2010

IveSeenTheLight

Generali wrote: »

Standard and Poors disagree

Do they disagree that the efforts the government have taken, or in that the outlook is that a recovery is not yet in place?

The IMF is praising the actions. We may have been in a far worse situation otherwise.

ruggedtoast

The IMF have praised Britain's recession "plan" because, to their surprise, Britain has already done exactly what the IMF demands whenever a country is in the unfortunate situation of being fuxxored enough to have to approach a cartel of dodgy, shadowy, unaccountable policy led elite bankers for 'help' in the first place.

ie. Responded to a position of debt by immediately taking on enourmous amounts of more debt which is fed straight into the private sector banking system in the vague hope it trickles back down to the taxpayers who are going to pay ten times over for it anyway.

If Brown had borrowed half of what he has done, and spent half of that on direct public spending infrastructure projects, the banks would still be part nationalised, we might have actually seem some good come out of the obscene debt he has crippled our country with; and the IMF would be hysterical and frothing at the mouth about communism and imminent socialist bankruptcy.

The IMF approve of Britain's debt policies. What a fricking happy day this is.

Generali

IveSeenTheLight wrote: »

Do they disagree that the efforts the government have taken, or in that the outlook is that a recovery is not yet in place?

The IMF is praising the actions. We may have been in a far worse situation otherwise.

S&P are saying that the Government's actions are putting at risk the UK's ability to remain solvent and service her debt. It's another POV.

ruggedtoast

IveSeenTheLight wrote: »

Do they disagree that the efforts the government have taken, or in that the outlook is that a recovery is not yet in place?

The IMF is praising the actions. We may have been in a far worse situation otherwise.

S&P and the IMF are two very different entities with very different roles.

The IMF, along with the World Bank exist to ensure that a globalised neo-liberal banking environment is maintained, that supports and perpetuates American led capitalism (and in many cases political interests).

Countries that are highly indebted and are locked into paying usurious interest to private financiers are by unlucky coincidence of their own dependency, unlikely to start having crazy thoughts about restructuring their own economies away from compound debt for instance.

The precondition of IMF loans is usually a fairly swingeing restructure of the countries governemnt policy that delimits state spending control so much that the government have little influence over how its spent.

Essentiual projects are tendered out to private companies and venture capitalists (foreign ones by default for developing countries) and cost 20 times what they should. Corrpuption isnt far behind as the private sector snout gets stuck in the tax payer trough.

Brown has already done all this to us on his own so the IMF quite likes him. They are a bit worried the serfs cant pay the cheques he's written though.

S&P are a rating agency who dont have any political necessity to approve or disapprove of his policies so are just forecasting our ability to be good for a loan. Diminishing.