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22 November 2000
UK ECONOMIC PERFORMANCE ?REMAINS IMPRESSIVE?, SAY IMF
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?The overall performance of the UK economy remains impressive?, labour market policies ?continue to be exemplary?, and ?the UK fiscal position is very healthy?, according to the latest assessment by experts from the International Monetary Fund. ?These achievements? they conclude, ?reflect, in no small measure, sound macroeconomic policies underpinned by strong fiscal and monetary frameworks that emphasise transparency and accountability.?
On the Government's progress towards delivering its central economic objective of high and stable levels of growth and employment, the IMF report that ?output is growing at a brisk pace, the unemployment rate is at its lowest level in a quarter century, and concerns at the beginning of the year about a pick up in inflation have not been borne out.?
The IMF also comment on key areas of the Government's micro-economic reforms:
They praise the Government's policies to move people off welfare and into work, noting that ?the labour market is an area where - particularly by comparison with most other European countries - UK policies continue to be exemplary?
They strongly back the Government's continuing drive to improve the UK's productivity performance to close the gap with our main competitors. Talking about the crucial importance of the challenge, they say that ?the UK's comparatively weak labour productivity performance? may be the Achilles? heel of an otherwise strong economy.? They go on to say that ?as regards productivity growth, the authorities? approach to this complex issue - combining a stable policy environment with key structural reforms - is certainly appropriate in terms of direction and emphasis.?
Commenting on the IMF's statement, the Chancellor, Gordon Brown, said:
?This latest assessment of the UK economy by the IMF explicitly supports the Government's macroeconomic framework for economic policy, it says our labour market policies are exemplary, it calls on us to continue our prudent and cautious approach to managing the public finances, and it states that our tax and spending plans are affordable.?
?I agree with the IMF that we need to focus on the need to improve our productivity performance, what they describe as the ?Achilles heal of an otherwise strong economy?. We can, by prudence and financial discipline, make stability our platform for building long term economic strength and high levels of productivity growth. That will mean more productive companies and rising living standards for all.?
Other major points in the IMF's Concluding Statement include:
A ?need for caution? in managing the public finances to ensure that mistakes of the past are avoided and gains are not used to over-stimulate the economy. The IMF recommend a ?prudent course of action for the March 2001 budget?. The need for the MPC ?to stand ready to move flexibly in either direction depending on how the risks develop.?
NOTES TO EDITORS
1. IMF surveillance of every major country, called an Article IV consultation, is carried out primarily through annual discussions between Fund staff and member governments and central banks. The resulting reports are discussed at the IMF's Executive Board within 3 months of the consultations. As part of the Government's drive to increase transparency, domestically and internationally, we publish the Concluding Statement of the IMF mission just after the mission team complete their work.
2. The IMF's report comes shortly after the OECD, another major international organisation, also praised the Government's management of the UK economy. In the preliminary edition of its Economic Outlook No.68, published on Tuesday 20 November, the OECD issued projections for the UK economy which are very similar to the Government's PBR forecasts. The OECD note the robust recent growth in the UK and point to Government policies for the labour market and for product market competition helping to ease inflationary pressures.
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3.Enquiries on the IMF report should be addressed to Michael Ellam (020 7270 5252) and Francis McGee (020 7270 5196) in the Treasury Press Office.