IMF: UK economic growth to reach 2.9% in 2014


Olivier Blanchard from the IMF said it was clear that their forecasts had been "too pessimistic"

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The International Monetary Fund (IMF) says the UK economy will be the fastest-growing in the G7 this year.

It says the UK will grow 2.9% in 2014, up from a January estimate of 2.4%, and will see growth of 2.5% in 2015.

Overall, the IMF says the global economy strengthened at the end of 2013. It forecasts global growth of 3.6% this year and 3.9% in 2015.

But it sees risks in emerging markets and warns of low inflation in advanced economies and geopolitical issues.


This is a relatively upbeat forecast for the world and for the UK in particular.

For the UK, it is yet another substantial upgrade to the IMF's assessment of the outlook. Only 12 months ago, the IMF forecast 1.5% growth for this year.

If the new figure of 2.9% turns out to be right, the UK will be the fastest-growing economy in the G7 major developed nations this year.

The global forecast also sees things getting better. Next year's figure would be just about the same as the average for the 10 years before the financial crisis.

Inevitably there are risks, however, including possible economic fallout from the political crisis in Ukraine.

The IMF also warns about the potential for excessively low inflation - yes, really.

Falling prices or deflation can be very damaging. So far, it is not affecting very many countries. But it is a potentially threatening cloud on the economic horizon.

The predictions come in the IMF's latest World Economic Outlook, its bi-annual analysis and projections of economic developments.

Global economy

The IMF said the US had seen stronger economic growth as Washington's debt and deficit cleared and predicted the country's economy would grow by 2.8% in 2014 and 3% next year.

But it scaled back its January growth forecast for emerging and developing nations, including India and Brazil, by 0.2 percentage points.

The IMF said the economies were hit as investors were more sensitive to policy weakness, with monetary policy being normalised in some advanced economies.

China's economic growth would be 7.5% for 2014 and 7.3% next year, it said, as it expected authorities in China to rein in their "rapid credit growth".

The IMF said India, South Korea and Indonesia should benefit from an improved export environment, but noted Thailand's prospects would be hit by political instability.

Russia's growth forecast was cut by 0.6 percentage points to 1.3% for the rest of 2014, because of "emerging market financial turbulence and geopolitical tensions relating to Ukraine... on the back of already weak activity", the IMF said.

Meanwhile, it said recovery of Europe's emerging economies would slow in 2014 and would also be hampered by any escalation of the situation in Ukraine.

Emerging Europe's forecast was revised down by 0.35 points to 2.4%.

Last week, the IMF's head warned that the global economy could be heading for years of "sub-par growth".

Christine Lagarde warned that without "brave action", the world could fall into a "low growth trap".

IMF economic growth forecast, in % per country for 2014 and 2015

  • China 7.5, 7.3
  • Russia 1.3, 2.3
  • India, 5.4, 6.4
  • UK 2.9, 2.5
  • US 2.8, 3.0
  • Euro area 1.2, 1.5
  • Emerging markets 4.9, 5.3

She said the global economy would grow by more than 3% this year and next, but that market volatility and tensions in Ukraine posed risks.

Ms Lagarde also urged more action to tackle low inflation in the eurozone.

Exports disappoint

The IMF says that growth has rebounded more strongly than anticipated in the UK on the back of easier credit conditions and increased confidence.

But it cautions that the recovery has been unbalanced, with business investment and exports still disappointing.

For instance, an external shock involving further growth disappointment in emerging market economies could spill over to the euro area, it says.

That, in turn, could spread to the UK through "financial linkages".

"In the United Kingdom, monetary policy should stay accommodative, and recent modifications by the Bank of England to the forward-guidance framework are therefore welcome," the report added.

"Similarly, the government's efforts to raise capital spending while staying within the medium-term fiscal envelope should help bolster recovery and long-term growth."

Danny Alexander said moving away from austerity measures would be "the worst thing possible to do"

In January, the IMF said it was increasing its UK growth forecast for 2014, from a previous 1.9%, to 2.4%. That figure has now been raised again.

Responding to the 2.9% growth prediction, Chancellor George Osborne hailed it as "proof that the economic plan is working" and criticised "growth deniers in the Labour Party" who he said were "intent on talking down the British economy".

For his part, shadow chancellor Ed Balls said the IMF was "right to warn about an unbalanced recovery" and accused the government of "complacently trying to claim that everything is going well".

On Tuesday, the National Institute of Economic and Social Research (NIESR) said that UK growth in the first part of 2014 had been "robust", and estimated that UK output grew by 0.9% in the three months ending in March.

Nevertheless, NIESR said that the UK economic recovery was "in its infancy" and that it did not expect the Bank of England to raise interest rates until the middle of 2015.

Food and drinks

Earlier on Tuesday, there was further indication of UK growth, with the release of manufacturing and industrial production figures.

UK manufacturing output grew by 1% in February from January, the Office for National Statistics (ONS) has said.

The rise - driven by pharmaceuticals, transport equipment, food, beverages and tobacco - was the biggest since September, and ahead of forecasts.

The year-on-year figure saw output 3.8% higher than in the same month of 2013.

Industrial output, which includes power generation and North Sea oil production as well as manufacturing, climbed 0.9% on the month.


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  • rate this

    Comment number 732.

    No No NO !!! it IS the fact that miller time is screwing the country and politicians are also screwing us and bleeding us dry with their property exchanges at the public purse expense.

  • rate this

    Comment number 731.

    Growth is all well and good but what they don't tell you is where that extra wealth is going. What good is 2.9% growth if all that extra wealthy is going to those who are already wealthy and your average Brit never sees it? Proper growth will be when unemployment has fallen and wages have risen.

  • rate this

    Comment number 730.

    This is really this growth forecast based on actual UK wide growth or City of London growth as one is fantastic.....the other means the rest of the UK is screwed aka stripped of money and hope to keep London's rich in bonuses and bubbly....????

    Anyone want to answer me please.

  • rate this

    Comment number 729.

    You don't have to be delusional to believe in never ending growth but it helps. At some point the resources will be insufficient for growth to continue and then the speculators will switch to weapons and food in the hope they can drain the life out of people Growth is good whilst it lasts but it cannot perpetually so get ready for it to end the UK only has enough land for half its populations food

  • rate this

    Comment number 728.

    We can presume that the positive figures are dependent upon continuing EU membership ?

    --and the other calculations ?

  • rate this

    Comment number 727.

    This current shambles in power are just papering over the cracks, and I refuse to be fooled by whatever self serving propaganda they might wantonly spout...

  • rate this

    Comment number 726.

    why the obsession with growth....we live on a planet with finite resources...

  • rate this

    Comment number 725.

    Labour must be wringing their hands. All that lovely money to blow if they get in!

  • rate this

    Comment number 724.

    Growth powered by a housing bubble created by a desperate government.

    I feel sorry for the people who've been sucked into this, they will see interest rates increase and the value of their properties drop. This government is totally irresponsible, roll on 2015.

  • rate this

    Comment number 723.

    712. Mike A

    Daily Mail reader with an inability to think for himself?

    The US was republican (Tory) when the WORLD financial crisis hit in 2007 .. the £40 billion bail out of RBS was down to greed in taking over ABN Amro while other banks failed owing to incompetent management and greedy borrowers.

    .. or do we equally blame the Tory John Major for the recession in 1992 and Heath for 1974?

  • rate this

    Comment number 722.

    Sadly all this so called growth has been aided by more debt, and unsustainable debt at that. Any growth that has been made, is by the people's efforts and not the politicians, whose austerity measures only serve to constrict growth. Ultimately it is all a house of cards of debt, which at some point will all come tumbling down in a spectacular mess. Our great leaders who made this economic mess!

  • rate this

    Comment number 721.

    The IMF keeps looking like a club existing purely for the sake of it. Of course it is an instrument in the hands of powerful people, I know, but they always seem to be at loss at explaing why they even exist.

    Anyway, I don't care what the IMF says about growth. Wherever there is growth, may it be growth in production of the necessary and useful, not in consumption of cheap clutter.

  • rate this

    Comment number 720.

    Why isn't anyone from the BBC questioning the coalition government about why they think that building an economy on sand/domestic debt is good, when they said, pre-election, that they "would NEVER build our countries recovery on domestic debt ever again, i.e.large 95% + mortgages" and yet here we are and the country has more domestic debt than and more borrowing than we did before the crash?

  • rate this

    Comment number 719.

    90. Araxmas 

Sometimes I get a bit proud of bring a Brit.

    You missed out our N. European neighbours who didn’t deregulate.
    I know ordinary people there, there doesn’t seem to be much austerity.
    Their income gap’s much less, social mobility, pensions, schools, benefits, much better.
    They don’t attack the ill and poor like UK.
    So they're a bit proud to be German, Danish,etc.

  • rate this

    Comment number 718.

    "704.Jeremy Lee

    You lot can bang on about migration when it comes to public services or wages – but immigrants are unequivocally good for GDP"
    So long as they leave when their contract expires or they run out of money, surely you don't want to have to pay more tax for their benefits when a British person could be working and lowering your taxes with less benefit demand.

  • rate this

    Comment number 717.

    I will bet that this will be the wrong kind of growth, the sort built on debt, that sucks in imports to supply a consumer and building boom. Should we be pleased that ASDA is creating new jobs which must be , by their nature, associated with selling imports to each other?

    Wealth can only be grown, mined or manufactured. Selling to each other or building homes just fuels inflation.

  • rate this

    Comment number 716.

    Exports are up but that doesn't help uk business, the reason exports are up is the pound is weak and other countries are doing well and have money to spend abroad. Uk consumers on the other hand still lack confidence. We need to see a drop in vat, that instantly benefits all Uk consumers and hopefully it will stop people offering me cash and asking if I can loose the vat.......

  • rate this

    Comment number 715.

    #708 Socialist

    Having lived in the UK and Germany, I hope the German ´Sozialmarktwirtschaft´( Social Capitalism) is accepted by EU members.

    It is however in direct opposition to British Feudalism --the real British problem with the EU (and Germany)

  • rate this

    Comment number 714.

    And all this this despite the great expense at Basingstoke.

  • rate this

    Comment number 713.



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