25th February 2016
The International Monetary Fund (IMF) has praised the UK’s economic progress citing among other factors the stronger jobs market but it cautioned that the upcoming Brexit referendum could hit progress.
In a note issued this week, the IMF said that the UK economy has been growing steadily.
“Economic recovery has been driven by robust expansion of private domestic demand and has supported rapid job growth, with the unemployment rate falling to 5.1 percent in late 2015,” it added.
Looking forward, it said growth looks set to continue, and anticipates it will average around 2.2% over the medium term.
It added: “Inflation, which is currently very low, 0.3% in January 2016, is expected to rise slowly as disinflationary effects from past commodity price falls and sterling appreciation dissipate, and as wages increase.”
IMF directors noted, however, that the “relatively benign scenario” is subject to risks and uncertainties.
It highlighted that these include those related to the global outlook, such as “sluggish productivity growth, a weak external position, still-high levels of household debt, and the forthcoming referendum on EU membership”.
As such they encouraged the authorities to remain vigilant to the challenges ahead and to continue their policy efforts to promote growth and further boost resilience.
In addition, the organisation noted that the UK’s property market remained a concern.
“Notwithstanding some recent deceleration in house prices and efforts to boost supply and contain housing-related risks, house price pressures remain elevated, posing continued challenges for both macroprudential and housing supply policies,” the note said.
Directors stressed that the buoyant market requires ongoing efforts to contain risks and address long-standing supply problems.
Last month, the IMF cut its forecast for global growth. It now expects that world economic activity will expand to 3.4% in 2016, rising to 3.6% in 2017, marking a 0.2% drop on its previous predictions for both years.