In their most recent statement, the IMF is warning that the UK government’s austerity programme may need to be set back if growth continues slowing. This is the third forecast in as many months that has the economy on a downward spiral.
Disturbingly, the World Economic Outlook which is released by the International Monetary Fund the global economic outlook is bleak. From last October when it was forecast that the growth rate would reach 2%, it was lowered in June to 1.5% and it now stands at an alarming 1.1%.
As well, the outlook for 2012 is not much better with the current forecast standing at 1.6% whereas as recently as June of this year it was expected to reach 2.3%. In their report, the IMF singled out the UK and Germany if the forecast errs on the downward side. These countries usually face low yields meaning that they should make every effort to delay some or many of their planned economic adjustments.
The IMF also noted that if the stock market in the UK continues on its current downward trend, the UK can expect a 17% possibility of a recession. In addition, they also urged the US and other major economic powers to go slowly on cutting back (austerity) or they risk losing an entire decade of growth.
As an added suggestion, IMF also stated that central banks should consider resuming the printing of money whilst keeping interest rates lower for a longer timeframe. This, they believe, would help to sustain global recovery.
Stating a worst case scenario, the IMF says that should the US and Asia sustain banking losses, both the US and the eurozone would experience a double dip recession which in turn would bring the UK down as well. This is based on the fact that both the eurozone and the US are major trading partners of the UK.
