Two reports released today show that if the UK's recovery happens too fast, it could create serious problemsby Jay Elwes / July 24, 2014 / Leave a comment
The International Monetary Fund today released its World Economic Outlook, a document that contained both good news and bad.
The good news is for Britain—or more specifically, for the Government. The IMF predicts that in 2014, the UK will experience the most rapid economic growth of all the advanced economies. So whereas the US will grow at 1.7 per cent, Germany and France at 1.9 per cent and 0.7 per cent respectively, and Italy at a meagre 0.3 per cent, Britain will grow at a rate of 3.2 per cent.
It’s an extraordinary assessment and one that contrasts sharply with the IMF’s previous prediction that Britain would only grow at 0.4 per cent in 2014.
Elsewhere in the global economy, however, the IMF finds reason for concern. US growth will be a meagre 1.7 per cent, which the IMF attributes to the harsh winter and a contraction in output, although it predicts a return to 3 per cent next year.
More worrying was perhaps the assessment given of China’s economy. The 2014 growth figure of 7.4 per cent appears healthy—but Chinese statistics are always suspect, not least those concerning the economy. The biggest issue for China is whether it can shift from a manufacturing and export-led economic model to one based more on domestic consumption. For this to happen, China must create internal markets: demand for products and services. But this isn’t happening. The IMF says that domestic Chinese demand has “moderated more than expected,” so far this year, meaning that the Chinese economy is heading in precisely the opposite direction to that intended by the Politburo.