The news comes from all sides, one day there is a positive report and the next there are numbers showing that some part of the economy may get worse. Today Chancellor George Osborne got some bad news.
The International Monetary Fund downgraded its forecasts for the British economy. It was one of the largest downgrades made to any developed economy. The growth forecast was lowered for 2011 from 25 per cent to 2.1 per cent.
The Office of Budget Responsibility (OBR) forecasted growth at 2.3 per cent. So the IMF’s forecast of 2.1 per cent comes in lower.
This information comes after the leave of office of OBR Sir Alan Budd after only taking on the job responsibilities for three months. He left the office amid talk that he did not have the independence he was promised for the position.
The OBR was established to make economic forecasts free of political interference. That came into question when last week it released publication of its unemployment forecasts on the heels of a Treasury leak of predicting a loss of 600,000 jobs in the public sector with Budget cuts.
The IMF raised its 2010 world growth forecast to 4.6 per cent from 4.1 per cent. Estimates were boosted for the United States and China. This shows that the IMF believes the world economy on a whole is recovering faster than what was predicted.
IMF warned that Europe has to quickly resolve debt problems and restore confidence in its banks. Jose Vinals, Director of the fund’s monetary and capital markets department, stated at a news conference in Hong Kong that Europe’s problems “could spill over to other regions and stall the global recovery.
“Further credible and decisive policy action is needed to resume progress on financial stability and keep the economic recovery on track.”