The chief economist of the International Monetary Fund (IMF) has suggested that the UK should consider slowing down its programme of spending cuts and tax rises.
Olivier Blanchard told BBC Radio 4’s Today programme this morning that the March budget would be a good opportunity for Chancellor George Osborne to “take stock and see whether some adjustments should now be made.”
Last year the IMF warned that the UK government should reassess its austerity measures, otherwise known as fiscal consolidation, if the economic situation did not improve by the new year.
Blanchard confirmed this morning that this position has not changed and that things do indeed “look bad” at the beginning of 2013, so there should be a reassessment of the government’s fiscal policy.
Budget time is the right time to make a change, he said, and suggested that “slower fiscal consolidation in some form may well be appropriate.”
Yesterday the IMF warned that the global economic recovery was weakening despite government efforts to stimulate growth, the BBC reported. The organisation’s expectations for global economic growth have been lowered and the IMF now believes that the eurozone will remain in recession in 2013.
The IMF also lowered its forecast for UK economic growth in 2013 to 1%, from the 1.1% predicted in October. Next year growth of 1.9% is expected, a downward revision from the earlier prediction of 2.2%.
Ed Balls, shadow chancellor for the opposition Labour Party in the UK, commented that the IMF had “repeatedly warned that a change of course would be needed in Britain if the economy turns out worse than expected” and said that the prime minister and chancellor must heed its advice.