IMF chief Kristalina Georgieva risks taking an overly pessimistic assessment of the impact of austerity measures on Britain
«Should I kneel?» Christine Lagarde asked in 2014 when she was called on to apologize for underestimating the strength of the British economy.
Then the head of the International Monetary Fund (IMF) faced pressure after her organization was too pessimistic about the impact of austerity measures on Great Britain.
Nearly a decade later, the IMF, now led by Kristalina Georgieva, is in danger of repeating the same mistakes.
New economic forecasts released on Tuesday showed that the UK has achieved the biggest increase in growth among all the G7 countries.
p> Biggest G7 Growth
However, forecasts still put the UK out of favor, with the UK economy hit the hardest of its peers in 2023, contracting by 0.3%, the IMF predicts.
Germany is the only major country expected to enter recession this year, although it is forecast to contract by just 0.1 percent.
At the same time, the eurozone is expected to grow by 0. 8 percent in 2023, in the US — by 1.6 percent. pc, and even Russia, hit by sanctions, will be 0.7 pc more by the end of the year.
The numbers look grim in Westminster as the UK lags behind the developed world.
Nonetheless However, economists say the IMF data is likely out of date.
“The problem with IMF forecasts is that they tend to be very outdated when they come out,” says Andrew Goodwin, chief economist at Oxford Economics in the UK.
—If you think of forecasters like us , we constantly update our forecasts based on incoming data. The IMF should usually draw the line long before they are released and accept the data as it was at the time.”
The world's lender of last resort does not have the best reputation. with forecasts for the UK.
Forecasts last October compared to actual growth estimates
Telegraph analysis shows that almost all IMF forecasts since the beginning of 2016 underestimate UK growth.
The Washington-based organization has made 28 forecasts for the UK economy since 2016 to 2022 in their forecasts for the global economy.< /p>
Of these, 25 forecasts were overly pessimistic compared to the IMF's best estimate of actual UK growth.
Only three forecasts turned out to be too optimistic. The latest round of gloomy forecasts could well add to the pessimistic tally.
The UK economy is improving rapidly, economists say, making it difficult for big institutions like the IMF to keep up.
Goodwin notes that in Last year, the UK had one of the highest growth rates among comparable economies at 4%.
“Calendar year growth rates are still heavily skewed by the post-pandemic experience,” he says. «I think the UK will be in the same position as much of the rest of Europe.»
Bright spots continue to emerge and the outlook has only improved for a few weeks as consumer and business confidence recovers.
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«It's only very recently that we've actually seen some better data,» Mr. Goodwin says.
Several right-wing politicians have accused the global lender of being biased against the UK in the past, especially on Brexit.
Lagarde, who led the IMF from 2011 to 2019, warned that a UK exit from the European Union would have “pretty bad, very, very bad consequences.”
Her words were echoed in the official report of the IMF. , which said that Brexit would have a «negative and significant impact» and warned of «serious regional and global damage.»
However, the most recent IMF estimates show that the UK economy grew by 2.3% in 2016 and 2.1% in 2017.
When Ms Lagarde made her comments, the MP who spoke For Brexite, Priti Patel accused then-Chancellor George Osborne of «preying on favors…to induce the IMF to intimidate the British people.»
Current CEO Georgieva previously had to fight for her position after she was accused of misrepresenting data in favor of China when she headed the World Bank.
Her future was in doubt after allegations surfaced that she pressured officials to improve China's rating in the World Bank's 2018 annual Doing Business report.
The IMF board ultimately slammed Georgieva » full credit» after concluding that the evidence «does not convincingly demonstrate» that she played «an improper role.»
Mr. Goodwin says: «I don't understand.» ;I don't think the [IMF] has any systematic bias [against the UK].»
Economists generally believe that the IMF's recent undervaluation reflects timing, not bias.
Projected Growth in 2023
The IMF publishes detailed forecasts for all the world's largest economies and the world as a whole four times a year, accompanied by hundreds of pages analysis.
The extensive nature of the forecasts and the amount of work required means that the IMF struggles to be as timely as local forecasters.
Martin Beck of EY Item Club says: a few months ago. [They have] to go through so many levels of bureaucracy.”
The latest UK figures are more positive than January's as gas prices have fallen sharply, which should help slow inflation.
The IMF was «too slow and too late» to revise its forecast for the UK, and their upward revisions are «probably still not enough,» says Xiuxin Mao of the National Institute of Economic and Social Research.
«They were very pessimistic at first, and they will probably need a little more time to adjust their data,» he adds.
Most of the reasons for the IMF's negative assessment in January have long since disappeared: the effects of the mini-budget in largely contained, inflation is now expected to come down earlier than previously thought, and government policy should stimulate growth in the labor force and investment, says Mr. Mao.
The Fiscal Responsibility Office last month was more optimistic about the UK economy than the IMF. The government's financial watchdog said the economy will contract by just 0.2% this year and grow by 1.8% next year.
Many other forecasters have raised their expectations for how the UK economy will develop this year amid growing positive data.
Mr Beck says «good news has recently emerged» in the form of higher-than-expected GDP numbers for January, a recovery in retail sales and forecasts suggesting electricity bills will fall more this summer than originally expected. .
Deutsche Bank on Monday said it now expects the UK to avoid recession and instead stagnate ahead of growth next year.
Deutsche Bank's Sanjay Raja says: no matter how you look at it, the soft data got a little better.”
If the UK economy continues to improve, the IMF may offer another apology.
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