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No Full Recovery Until 2015, Says The Imf

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The warning, contained in a pre-released chapter of its World Economic Outlook, undermines hopes among economists that the UK is poised for full recovery.

The IMF said that past experience, based on 88 banking crises over the past four decades, showed that economies tend to sacrifice around 10pc of their economic output, and take a significant number of years to regain their full health and dynamism. It said: “Typically, banking crises have a long-lasting impact on the level of output although growth eventually recovers. Lower employment, investment, and productivity all contribute to sustained output losses. The medium-term output losses following banking crises are substantial. Output per capita does not recover to its pre-crisis trend because capital per worker, the unemployment rate, and productivity do not typically return to their pre-crisis trends within seven years after the crisis.â€

The paper said the conclusions were “sobering†for politicians hoping for an immediate return to the fast growth rates experienced in the run-up to 2008.

House prices can only up on this news.

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