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Osborne Is Getting And F On His Interim Report Card

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The report is out! And the International Monetary Fund has warned that the UK faces a slow recovery.

It urges the government should implement new growth measures to stimulate the economy.

But it has not directly call on George Osborne to delay his spending cuts, saying there are "nascent signs of momentum”.

There's no explicit call to slow the pace of fiscal consolidation, but the IMF remains concerned about the economic situation.

In its official statement following the two-week visit to London, the IMF said there are encouraging economic signs, but warns:

The UK is, however, still a long way from a strong and sustainable recovery.

Notwithstanding the recent uptick in activity, per capita income remains 6 percent below its pre-crisis peak, making this the weakest recovery in recent history.

Of particular concern is that capital investment (as a share of GDP) is at a postwar low, and that youth unemployment is high.

The key risk is that persistent slow growth could permanently damage medium-term growth prospects—this could arise if private sector deleveraging is larger than expected, credit conditions fail to improve, external demand does not pick up, and the drag from fiscal consolidation is greater than anticipated.

In addition, despite recent market calm, growth in the euro area is likely to be weak, and the re-emergence of market tensions cannot be ruled out, with the potential for continued spillovers to the UK from depressed exports, higher bank losses and funding costs.

The 2013 Budget announced a new scheme, Help To Buy, aimed at boosting activity in the housing market. This measure may temporarily help boost confidence in the housing market, but there is a risk that, in the absence of an adequate supply response, the result would ultimately be mostly house price increases that would work against the aim of boosting access to housing. To mitigate this risk and engineer a supply response, the government should consider fiscal disincentives for holding land without development.

More at link.

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**** from the IMF was just asked by the Evening Standard to what extent he's concerned about FLS and Help to Buy increasing house prices, and what level of mitigation there should be by increasing the supply side alongside the demand side, eg through a land tax on developers.

**** from IMF spouted a load of shite about how there is room for a certain level of "augmentation" of house prices, but pitching where that level is, in a country where "house prices are high and have been declining for several years", is difficult.

What a ****.

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  • 243 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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