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Sancho Panza

British Economy Too Reliant On People Spending Money, Warns Imf

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Telegraph 10/4/14

'Britain is still too reliant on consumer spending to drive growth and further action is needed to foster stronger exports and investment to ensure the economy is "three engines powered", according to the head of the International Monetary Fund. The IMF updated its forecasts for global growth this week and now believes the UK will be the fastest growing major economy this year, with growth of 2.9pc.

Christine Lagarde said the Fund's upgrade of the UK was "significant".

"Frankly, we are delighted that the UK's growing at that speed, at that pace," she said.

However, Ms Lagarde raised concerns that the recovery was not being supported enough by business investment and export growth, even though recent data were encouraging.

"At the moment [the recovery is] predominantly driven by consumption. The UK has to export more, the UK has to invest more," she said in an interview with American journalist Charlie Rose.

"We certainly hope that [the UK] can ... strengthen that growth going forward and make it three engines powered."

Earlier this week, Olivier Blanchard, the Fund's chief economist, admitted the IMF's previous forecasts had been "too pessimistic".

Mr Blanchard famously singled out the UK for criticism in April 2013 and said Chancellor George Osborne was “playing with fire” with his austerity drive.

Ms Lagarde also said that a full-scale money printing programme in the eurozone or the introduction of negative interest rates was inevitable and just a “question of timing”.

She said that although the IMF fully respected the European Central Bank’s decisions, she was “encouraged” by comments last week by Mario Draghi, the ECB’s president, that the bank stood ready to act to keep the recovery on track and stave off deflation.

“[ECB policymakers] have their fingers on the pulse of the European economies and we were very encouraged to see at their latest board meeting that they are envisaging any tools to respond to the situation,” she told a press conference on Thursday. “I think it is going to be a question of timing now.”

Last week, an irritated Mr Draghi responded to further calls by the IMF for the ECB to launch quantitative easing or other unconventional policies by saying the IMF should put out a wishlist for America just before the next Federal Reserve policy meeting.

Ms Lagarde said the IMF was in close dialogue with the ECB and respected its judgment.

Ms Lagarde also said talk of a protracted slowdown in emerging markets was “overdone”.

“This story about emerging markets lagging behind, slowing down and having lost their momentum is a little bit overdone. What is new is that advanced economies have picked up, and there is that rebalancing happening at the moment,” she said.

Her comments were echoed by Jim Yong Kim, president of the World Bank, who said the outlook for developing economies was still “very, very positive".

He also expressed concerns that the Ukrainian crisis could have a significant impact on Russian growth, even if the crisis were shortlived. Last month, the World Bank said a protracted crisis could cause the Russian economy to contract by 1.8pc this year.

Ms Lagarde said the IMF was working hard to finalise its aid programme for Ukraine, which would be ready for approval by late April or early May. She suggested the aid could also be used to service its Russian debts.

She also vented frustration at the slow progress of its own reforms giving developing nations stronger representation at the IMF.'

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So long as the chinese keeps re-patriating pounds in exchange for million quid slave boxes, we'll be fine.

Just lets hope china doesnt go the way of Japan in 1990.

Actually im quite serious. I think foreign investors should be limited to buying leasehold only (ie, no houses) but so long as they leave the actual non flat housing stock to resident brits, im not too bothered.

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So long as the chinese keeps re-patriating pounds in exchange for million quid slave boxes, we'll be fine.

Just lets hope china doesnt go the way of Japan in 1990.

Actually im quite serious. I think foreign investors should be limited to buying leasehold only (ie, no houses) but so long as they leave the actual non flat housing stock to resident brits, im not too bothered.

But how can China avoid going the same way as Japan? Moreover, how can Japan avoid collapsing into bankruptcy and default in the next five years?

The low-hanging fruit has all been picked, Peak Everything looms.

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