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| International Monetary Fund upgrades UK growth forecast to 0.9% | International Monetary Fund upgrades UK growth forecast to 0.9% |
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| Britain is on course to grow at a faster pace than expected this year, the International Monetary Fund (IMF) said on Tuesday, despite signalling weaker growth across much of the developing world, the eurozone and the US. | Britain is on course to grow at a faster pace than expected this year, the International Monetary Fund (IMF) said on Tuesday, despite signalling weaker growth across much of the developing world, the eurozone and the US. |
| The UK economy will expand by 0.9% against the previous forecast of 0.6%, according to the Washington-based organisation in its quarterly global financial health check. But a lacklustre performance by developing countries, a prolonged eurozone recession and US spending cuts will restrict Britain's GDP growth in 2014 to 1.5%, it added. | The UK economy will expand by 0.9% against the previous forecast of 0.6%, according to the Washington-based organisation in its quarterly global financial health check. But a lacklustre performance by developing countries, a prolonged eurozone recession and US spending cuts will restrict Britain's GDP growth in 2014 to 1.5%, it added. |
| George Osborne will be cheered by the more upbeat outlook after enduring two years of brickbats from the IMF, which has lectured the government on taking a more expansionary stance and delaying public spending cuts. | George Osborne will be cheered by the more upbeat outlook after enduring two years of brickbats from the IMF, which has lectured the government on taking a more expansionary stance and delaying public spending cuts. |
| Yet growth of 1.5% next year could still be too weak to cut unemployment or spark a revival in manufacturing investment, which the chancellor believes is necessary for a more sustainable recovery. Those concerns were underlined by official data that showed an unexpected slowdown for Britain's manufacturers. | Yet growth of 1.5% next year could still be too weak to cut unemployment or spark a revival in manufacturing investment, which the chancellor believes is necessary for a more sustainable recovery. Those concerns were underlined by official data that showed an unexpected slowdown for Britain's manufacturers. |
| Nonetheless, the IMF forecasts were welcomed by the government. A Treasury spokeswoman said: "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." | Nonetheless, the IMF forecasts were welcomed by the government. A Treasury spokeswoman said: "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." |
| The IMF warned against getting carried away. Thomas Helbling, an IMF official, said the UK recovery was stronger than previously estimated, but remained slow. "It is a small revision, nothing exceptional. The recovery is still weak and policyholders should still take measures to secure stronger growth," he said. | The IMF warned against getting carried away. Thomas Helbling, an IMF official, said the UK recovery was stronger than previously estimated, but remained slow. "It is a small revision, nothing exceptional. The recovery is still weak and policyholders should still take measures to secure stronger growth," he said. |
| The improved outlook has been confirmed in a report by the Institute of Directors, which represents nearly 37,000 company directors. According to an IoD poll, nearly two-thirds of members believe the outlook is brighter than at any stage since 2008. The survey follows a similar finding by accountancy firm Deloitte, which reported this week that finance directors were more willing to take risks with investment and spending decisions than at any time in the last six years. | The improved outlook has been confirmed in a report by the Institute of Directors, which represents nearly 37,000 company directors. According to an IoD poll, nearly two-thirds of members believe the outlook is brighter than at any stage since 2008. The survey follows a similar finding by accountancy firm Deloitte, which reported this week that finance directors were more willing to take risks with investment and spending decisions than at any time in the last six years. |
| While the IMF has become more optimistic about the UK, it has cut its global growth forecast from 3.3% to 3.1% this year and from 4% to 3.8% for 2014. It cites weak demand and slower growth in key emerging market economies, and a longer than expected recession in the eurozone. | While the IMF has become more optimistic about the UK, it has cut its global growth forecast from 3.3% to 3.1% this year and from 4% to 3.8% for 2014. It cites weak demand and slower growth in key emerging market economies, and a longer than expected recession in the eurozone. |
| The international lender of last resort, which has supported bailouts of Greece, Portugal and Ireland, took eurozone leaders to task, urging them to make strides to a closer banking union to ease fears of further bank collapses. | The international lender of last resort, which has supported bailouts of Greece, Portugal and Ireland, took eurozone leaders to task, urging them to make strides to a closer banking union to ease fears of further bank collapses. |
| It called on Brussels to walk the tightrope between cutting public expenditure to pay down debt on one hand and spurring growth with policies to boost business investment and consumer demand on the other. "Policies to reduce financial market fragmentation, support demand, and reform product and labour markets are also crucial for stronger growth and job creation," it said. | It called on Brussels to walk the tightrope between cutting public expenditure to pay down debt on one hand and spurring growth with policies to boost business investment and consumer demand on the other. "Policies to reduce financial market fragmentation, support demand, and reform product and labour markets are also crucial for stronger growth and job creation," it said. |
| The IMF downgraded its forecast for the eurozone from a 0.4% contraction to 0.6% this year, and expects a return to growth in 2014 but at a weak 0.9%, lower than the 1% it had previously predicted. | The IMF downgraded its forecast for the eurozone from a 0.4% contraction to 0.6% this year, and expects a return to growth in 2014 but at a weak 0.9%, lower than the 1% it had previously predicted. |
| After a period of nervous trading in financial markets, the IMF report said the global economy was vulnerable to new risks in addition to the threat posed by huge sovereign debts – ratings agency Standard & Poor's downgraded Italy's sovereign credit rating by a point yesterday – and the domino effect of a bank collapse that has undermined confidence in the wake of the 2008 financial crash. | After a period of nervous trading in financial markets, the IMF report said the global economy was vulnerable to new risks in addition to the threat posed by huge sovereign debts – ratings agency Standard & Poor's downgraded Italy's sovereign credit rating by a point yesterday – and the domino effect of a bank collapse that has undermined confidence in the wake of the 2008 financial crash. |
| In particular, the threat to developing countries from weaker demand and a collapse in the value of their currency has become greater, it said. | In particular, the threat to developing countries from weaker demand and a collapse in the value of their currency has become greater, it said. |
| Referring to the Bric countries of Brazil, Russia, India and China, it said: "The outlook for many commodity exporters (including those among the Brics) has also deteriorated due to lower commodity prices." | Referring to the Bric countries of Brazil, Russia, India and China, it said: "The outlook for many commodity exporters (including those among the Brics) has also deteriorated due to lower commodity prices." |
| The IMF's view that the UK recovery was weak was leapt on by Labour's shadow chancellor, Ed Balls, who pointed out that the revised figure was still lower than the IMF's forecast at the start of this year. | The IMF's view that the UK recovery was weak was leapt on by Labour's shadow chancellor, Ed Balls, who pointed out that the revised figure was still lower than the IMF's forecast at the start of this year. |
| "And the IMF's advice to George Osborne remains unchanged. As they said just a few weeks ago, Britain is a long way from a strong and sustained recovery and so the government should bring forward infrastructure investment right now to create jobs and growth." | "And the IMF's advice to George Osborne remains unchanged. As they said just a few weeks ago, Britain is a long way from a strong and sustained recovery and so the government should bring forward infrastructure investment right now to create jobs and growth." |
| Osborne's good news was tempered by official figures showing that factory output dropped 0.8% in May, rather than rising 0.2% as economists had forecast. | Osborne's good news was tempered by official figures showing that factory output dropped 0.8% in May, rather than rising 0.2% as economists had forecast. |
| The wider industrial sector, which also includes energy and mining and makes up 15% of the economy, was flat in May, the Office for National Statistics added. | The wider industrial sector, which also includes energy and mining and makes up 15% of the economy, was flat in May, the Office for National Statistics added. |
| "The industrial production figures are an unwelcome jolt back to reality after the run of very strong data releases over the past few weeks," said Andrew Goodwin, senior economic adviser to the EY Item Club, a forecasting group. | "The industrial production figures are an unwelcome jolt back to reality after the run of very strong data releases over the past few weeks," said Andrew Goodwin, senior economic adviser to the EY Item Club, a forecasting group. |
| Official data also showed a bigger than expected deterioration in Britain's trade deficit in May, although there was a fillip for business secretary Vince Cable in his push to boost trade with new markets. Exports to non-EU countries increased by 4.6% to a record £39bn in the three months to May. | Official data also showed a bigger than expected deterioration in Britain's trade deficit in May, although there was a fillip for business secretary Vince Cable in his push to boost trade with new markets. Exports to non-EU countries increased by 4.6% to a record £39bn in the three months to May. |
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