IMF backs Britain's economic policy

LONDON: The International Monetary Fund said Monday it saw no reason for the British government to change its economic policy as it seeks to slash a massive deficit.

In its annual report on the British economy, the IMF said the "unexpected" weakness in economic growth and a rise in inflation over recent months "raises the question whether it is time to adjust macroeconomic policies".

It added: "The answer is no as the deviations are largely temporary.

"Strong fiscal consolidation is underway and remains essential to achieve a more sustainable budgetary position, thus reducing fiscal risks."

But it warned "there are significant risks to inflation, growth and unemployment", which may require a policy response.

The IMF slightly downgraded its growth forecast for the British economy to 1.5 percent, compared to 1.7 percent in its last projection in April.

Over the medium term, it foresees real GDP growth "accelerating gradually" to around 2.5 percent.

Prime Minister David Cameron's year-old coalition government has faced domestic calls to slow its programme of deep spending cuts because economic recovery has faltered since Britain pulled out of a record-length recession in late 2009.

Earlier Monday, finance minister George Osborne dismissed calls for a rethink of the deficit reduction strategy, saying it was the "rock" on which Britain's economic recovery was being built.

Osborne, the Chancellor of the Exchequer, said critics should "join the dots" and recognise that a spike in oil prices and problems in eurozone countries such as Portugal and Ireland were causing "choppy" conditions.

Copyright AFP (Agence France-Presse), 2011