IMF chief Christine Lagarde praises UK economy

IMF Christine Lagarde holding a joint press conference with German Finance Minister Wolfgang Schauble (L) and British Chancellor of the Exchequer George Osborne (R) Image copyright EPA

The head of the International Monetary Fund, Christine Lagarde, has endorsed the UK government's economic strategy.

Speaking at an IMF meeting in Washington she said: "It's obvious what's happening in the UK has worked."

Ms Lagarde played down differences between the IMF calculation of the future deficit and the more optimistic one provided by the Office for Budget Responsibility.

She said the figures were virtually the same, but just calculated differently.

George Osborne was sharing a panel with Ms Lagarde and German finance minister Wolfgang Schaeuble when she made the remarks.

"Generally in any election year, the teams that provide the hypotheticals on which future deficits are forecast, err on the side of caution and assume that whatever is announced is not necessarily or inevitably going to happen," she said.

Ms Lagarde added that the UK authorities had managed to provide the right balance of spending cuts and revenue raising.

"It's clearly also delivering results, because when we look at the comparative growth rates delivered by various countries in Europe, it's obvious that what's happening in the UK has actually worked," she said.

The IMF had predicted that the UK will have a deficit of £7bn in 2019-20, while the OBR expects there to be a surplus of £7bn.

'New mediocre'

Despite the large figures, the difference is just 0.6% of GDP.

Ms Lagarde said that this week's talks aimed to devise a plan to "prevent this new mediocre from becoming the new reality", adding: "The good news is that the global recovery continues. The not-so-good news is that growth remains moderate and uneven."

The IMF is forecasting only modest overall growth for the global economy and has downgraded the prospects for some countries.

The prediction for the US - the world's largest economy - has been cut from 3.6% to 3.1% for 2015 as IMF economists believe the sharp rise in the value of the dollar will make American exports less competitive.

The Fund is also concerned that new volatility in financial markets could result if the US Federal Reserve finally raises interest rates later this year.

Ed Balls, the Shadow Chancellor, has told the BBC it was "not the IMF's job to arbitrate" between the parties' positions on the UK economy.

Speaking on a visit to a printing company in Cambridge, he said it was up to voters to decide "who's going to balance the books in a fair way".

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