Stephanomics on the IMF's UK assesment: Mind the caveats and risks

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Stephanie Flanders breaks down the IMF statement, noting that some of the risks and caveats to the IMF's support for the Chancellor's deficit reduction plan:

"...the IMF's own research, for last year's autumn World Economic Outlook...suggested that Mr Osborne's plans were likely to have a significant effect on growth in the short-term.

The risk - spelled out in today's report - has always been that this short term cost will turn out to be permanent, because capacity gets lost forever.

To repeat, the IMF does not think that this has happened yet.

Today's report says that the government's policies are broadly right. It explicitly rejects the advice offered by some economists in Sunday's Observer [calling for a Plan B].

But the Fund does clearly believe that the chancellor should have a wider range of back-up plans than he has so far been willing to own up to."


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