UK growth prospects improving

The International Monetary Fund has lifted its economic growth forecast for the UK this year from 0.7 per cent to 0.9 per cent.

Not since April 2012 has the IMF raised its UK forecast. A Treasury spokesman said it showed that the economy was moving from “rescue to recovery”.

In April this year, the fund cut its forecast to 0.7 per cent from one per cent, sparking wide debate about whether Chancellor George Osborne should alter his policies.

Also today, the IMF cut its forecast for global economic growth.

The fund’s World Economic Outlook trimmed overall global growth this year by 0.2 per cent to 3.1 per cent because of weakness in emerging market economies. In 2014, growth is forecast to be 3.8 per cent, also down 0.2 per cent.

Although the upward revision of UK growth is modest, it is likely to be cited as evidence that the economy is moving in the right direction.

It comes after surveys in recent days reported a rise in business optimism, growth in the service sector, and confidence in the housing market.

A survey from research firm Markit indicated that the UK service sector grew at its fastest pace for two years in June, and a British Chambers of Commerce survey found UK business confidence at a six-year high.

However, this was tempered today with latest Office for National Statistics data showing that UK manufacturing output unexpectedly fell in May.

A Treasury spokesman welcomed the fund’s report: “The IMF has confirmed that the UK economy is moving from rescue to recovery, revising up its growth forecast for this year.

“But the IMF again warns of the continued risks to the global economy, showing that the recovery cannot be taken for granted.” (BBC)

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