The IMF’s worst case is quite good
The IMF is gloomy, but if this is as bad as it gets we should rejoice. The International Monetary Fund thinks UK economic growth will slow to 1.6 per cent this year and be no better in 2009. But that is still plus 1.6 per cent: at the bottom of previous cycles there has been a negative sign in front of the figure.
The only thing negative has been the reporting of the latest IMF forecasts. Yes, the UK faces a serious slowdown, but that 1.6 per cent growth is still better than the prediction for the Eurozone, whose growth is expected to be just 1.4 per cent this year (like Japan’s) before collapsing to 1.2 per cent next year, or Canada’s 1.3 per cent for 2008 – nevermind the US growth of 0.5 per cent followed by 0.6 per cent.
The UK growth will be the highest in the G7, according to the IMF.
True, having grown at 3.1 per cent last year the fall looks sharper for the UK than for those other economies that were poorer performers in 2007 too. But there have been many years in Britain’s economic history when anything above 1 per cent looked good, nevermind 1.6 per cent.
The reasons not to become complacent, however, are first, that if other countries have worse economies than ours, that hits UK export markets, and second, that the IMF is very likely to be wrong. It has cut its forecasts sharply since its January predictions as the depth of the global problem sank in and may well cut them again before the year is out.
The UK Treasury’s forecasts remain much higher at 2 per cent for this year with an improvement in 2009, but that reflects not only optimism but timing. Those figures came from the March Budget and already, like the IMF figures, are out of date. At some point, Alistair Darling will have to cut his forecasts too.
