IMF: UK bank bailouts a success
IMF praises steps taken by UK government to get economy back on track
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Wednesday, 20, May 2009 05:23
The government has received an unexpected boost over its handling of the economic crisis after the International Monetary Fund praised its "bold and wide-ranging" actions since the recession began.
The IMF, in its annual assessment of the British economy, hailed the nationalisation of failing banks, the ring-fencing of toxic assets, easing of monetary policy and the fiscal stimulus.
"The aggressive actions by the authorities have been successful in containing the crisis and averting a systemic breakdown," its report said.
"Indeed there are tentative signs that confidence is improving and that the output decline is moderating."
Ahead of the release of the mission's findings, chancellor Alistair Darling had appeared in confident mood when he said he stood by his forecast of marginal growth in the economy next year.
In last month's Budget statement, Mr Darling predicted growth of 1.25 per cent in 2010, compared with a forecast of 0.4 per cent contraction from the IMF.
On Wednesday the IMF accepted that the British economy was still under considerable stress but said it expected gradual quarterly growth next year, claiming the steps taken by the government when the recession bit were proportionate to exposure of the economy to global shocks; as well as the central role the financial sector plays for Britain and its inflated house prices and high levels of debt.
But the report said it was not convinced whether the recapitalisation of the banks would improve credit provision sufficient for a robust recovery, predicting a fall in consumer spending and warning that the economy remained susceptible to potential shocks.
Its authors conclude that with "continued effective handling of problems in the financial sector and a firm commitment to the existing policy objectives of price stability and fiscal sustainability, in line with our advice, we expect the authorities to deliver domestic and external stability and set the stage for a sustainable recovery".