The International Monetary Fund (IMF) has said the British economy is recovering well, but has downgraded its growth forecast for next year.
In an annual assessment of the UK economy, the IMF says the British economy is ‘on the mend’. It expects growth of 1.2% this year, 2.1% next year and 2.5% over the medium term.
It urged the Conservative-Liberal government to continue with its plans to aggressively cut the British budget deficit, saying it was essential for debt sustainability.
It said the fiscal tightening proposed would dampen but not depress demand in the economy, hence the slight downgrade for next years growth figures.
However it said the costs of the deficit-cutting plans greatly outweighted the loss in confidence in fiscal sustainability if the British government failed to follow through on its plan.
Over the weekend the opposition Labour Party elected Ed Miliband as its new leader.
He had campaigned on a policy of not cutting the deficit as rapidly as the British government plans. At 11% of GDP, the British deficit is the second highes in the EU after Ireland.
