IMF Say UK Should Prepare A Plan B For Economy

22 May 2012 17:00 - Crage Campbell

    



IMF Say UK Should Prepare A Plan B For Economy

The International Monetary Fund has urged the Government to prepare a Plan B, featuring tax cuts and increased spending on infrastructure, to support the UK economy in case the Eurozone collapses or recovery fails to take off. In the report the IMF said further easy of monetary policy, by cutting the 0.5% base interest rate, was necessary to inject some vigour into a flat economy. It also said the Government should consider an immediate increase in spending on infrastructure which will boost growth and employment,

However, the IMF warned of the increasing risk of an escalation of the crisis in the Eurozone, which could deliver a “substantial contractionary shock” to the UK economy. If Greece were to exit from the single currency the IMF said this could force the Government to consider delaying necessary plans to implement short term measures to shore up growth. IMF managing director Christine Lagarde said, “If the economy turns out to be significantly weaker than forecast, fiscal easing should be considered.” She added, “Measures should be focused on the rest of the world,” and that, “The stresses in the euro area affect the UK through many channels. Growth is too slow and unemployment - including youth unemployment - is too high. Policies to bolster demand before low growth becomes entrenched are needed."

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Related Links :
IMF - UK Economic Health Check
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