By Max Clarke
Rising inflation, unemployment and stunted jobs growth have not prompted the IMF to recommend a review of the Coalition Government’s economic policy.
While such damaging indices are higher than expected, the international banking giant has concluded that the government should remain on track with Chancellor Osborne's fiscal policies, as such “deviations are largely temporary”.
Though the UK economy has flatlined for two consecutive quarters, the downturn has been exacerbated by ‘spiking’ commodity and energy prices. Recovery should, urge the IMF, be maintained through private investment, not from further government intervention.
The IMF's assertions will be met with hostility by trade unions who believe such cuts are damaging the economy, and the very fabric of society. Prominent union, GMB, is already balloting its 250,000 members for strike action in anger to the cuts.
The Fund also warned that the government’s efforts to consolidate debt by FY2014/15 will ‘create headwinds for short term growth’. Inflation is likely to remain above 4% and rapid GDP growth will not be seen in the coming months as austerity measures further dampen consumer confidence, impeding a retail led recovery.
UK financial system stability, noted the IMF’s summary of the review, is important for domestic and global macroeconomic stability and requires the highest quality supervision and regulation. Prospects for orderly rebalancing toward private sector-led growth will depend in part on continued financial sector healing.
Furthermore, an analysis of spillovers from the UK shows that the size and role of the UK financial system in global intermediation puts it in a position to originate and transmit shocks to the global financial system, but also to dampen them. Financial stability in the UK is thus a global public good.
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