{
  "title": "Transcript of the UK Article IV Mission Concluding Press Conference with David Lipton",
  "publication": "IMF News, May 22, 2013",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/54/tr052213",
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  "summary": "Event: IMF Article IV Consultation press conference hosted at the UK Treasury.",
  "publishDate": "2013-05-22",
  "sections": [
    {
      "heading": "Overview and context",
      "content": "- Event: IMF Article IV Consultation press conference hosted at the UK Treasury.\n- Date: May 22, 2013.\n- Participants: UK Chancellor George Osborne; David Lipton, First Deputy Managing Director of the IMF, and IMF mission team.\n- Framing: Five years into the global financial crisis; UK especially affected due to its role in the global financial system. IMF conducted a two-week in-depth Article IV mission to assess UK policies and outlook."
    },
    {
      "heading": "Assessment of the UK economy — key findings",
      "content": "- Recovery status:\n  - \"Durable economic recovery has not yet taken hold.\"\n  - \"Recent data suggests some improvement in economic and financial conditions\" but recovery \"has a way to go.\"\n- Labor and investment:\n  - \"Investment has been persistently weak.\"\n  - \"Unemployment, especially among young people, is high.\"\n- Financial intermediation:\n  - \"Credit intermediation is not adequate as balance sheets are still impaired.\"\n  - Banking system: \"a fairly concentrated banking system with a large fraction of assets remaining in the hands of a small number of banks.\"\n- Output gap:\n  - IMF estimate cited of \"about a four percentage point output gap.\"\n  - Projection on present trajectory: \"that would only be halved by the end of the five-term medium-term framework.\"\n- Risks from prolonged slack:\n  - \"The economy may lose some of its capacity permanently.\"\n  - \"People out of work become less employable\" and \"the absence of investment leaves you with a smaller stock of capital.\""
    },
    {
      "heading": "Multipronged policy strategy recommended",
      "content": "- Overarching approach:\n  - A multipronged strategy spanning monetary, financial sector, fiscal, and structural policies to restore growth momentum and rebalance the economy.\n  - No single \"silver bullet\"; policies must be coordinated.\n- Monetary policy:\n  - Recommendation: \"monetary policy should remain accommodating and provide assistance to households and investors that rates will be kept low until recovery achieves full momentum.\"\n  - Communication: central bank should consider forward-oriented communication to strengthen policy impact; exact communication form left to central bank discretion.\n  - Note: \"monetary policy impact is diminishing over time\" and transmission is impaired by weak banks.\n- Financial sector policy:\n  - Priority: accelerate balance-sheet repair of major banks to remove supply-side constraints on lending, notably to SMEs.\n  - For publicly supported banks: \"a clear strategy is needed with a view to returning them to private ownership in a shape to resume lending activity.\"\n  - Sovereign backstop: \"If a sovereign backstop is required to meet a capital shortfall ... that should be provided, as it would have a high multiplier in terms of economic growth.\"\n  - Recapitalization stance: public sector involvement is acceptable if private recapitalization cannot be achieved and if done within a sound recapitalization plan.\n- Fiscal policy:\n  - Use fiscal space to support growth while maintaining credible medium-term consolidation.\n  - Specific recommendation: \"bring forward planned capital spending\" to offset near-term drag from discretionary measures.\n  - Fiscal neutrality over medium term: advance spending within the government's medium-term framework (i.e., front-load investment while keeping overall medium-term plan).\n  - Acknowledge trade-offs: \"higher fiscal support ... is not a straightforward choice as the deficit is still high.\"\n- Structural policies:\n  - Focus on skills, competitiveness, and accelerating large infrastructure projects.\n  - Echoes recommendations of the LSE Growth Commission and the Heseltine review.\n  - Housing: balance demand-side measures (e.g., help-to-buy) with supply incentives to avoid excessive house-price increases; encourage development of land held for capital appreciation."
    },
    {
      "heading": "Quantitative and programmatic specifics cited",
      "content": "- Infrastructure pipeline: government \"has a roster of about 300 billion pounds of infrastructure projects\" under consideration.\n- Fiscal drag example: reference to \"the full 10 billion pounds worth of drag this year from the fiscal consolidation\" raised in Q&A.\n- Infrastructure multiplier: IMF view that infrastructure spending likely yields \"probably a multiplier of 1, possibly higher.\"\n- Output gap estimate: \"about a four percentage point output gap.\"\n- Timeframe references:\n  - \"five-term medium-term framework\" (used in projection context).\n  - \"first year at the front end\" for accelerating some infrastructure investments like social housing and school repairs."
    },
    {
      "heading": "Policy sequencing and interactions emphasized",
      "content": "- Monetary policy effectiveness depends on parallel financial-sector repair to restore bank lending capacity.\n- Fiscal front-loading of capital projects can be fiscally neutral over the medium term yet provide near-term demand support.\n- Private sector participation is important in selecting and financing infrastructure projects to maximize impact.\n- Continuous, year-by-year reassessment is recommended: \"we tend to take a country-by-country, year-by-year approach to making such assessments.\""
    },
    {
      "heading": "Risks of inaction and scenarios",
      "content": "- If recommendations are not adopted:\n  - Prolonged high unemployment and persistent output gap.\n  - Potential permanent loss of productive capacity.\n  - Continued weak investment and impaired credit intermediation.\n- If recommendations are implemented:\n  - Front-loaded infrastructure and supportive measures could \"offset the drag\" from discretionary fiscal tightening and boost growth and private-sector expectations.\n  - Public recapitalization of banks, if needed and well designed, could have a \"high multiplier in terms of economic growth.\""
    },
    {
      "heading": "Notable Q&A highlights",
      "content": "- On how much capital spending to bring forward:\n  - IMF suggests advancing projects that can start quickly (e.g., social housing, repairing schools), noting feasibility varies across the 300 billion pounds roster.\n  - Exact feasible amounts would require technical review of the infrastructure roster.\n- On fiscal pacing:\n  - IMF suggests adjusting timing within the medium-term framework to be more supportive at the front end while preserving medium-term credibility.\n- On house-price risks from demand-side stimulus:\n  - Need to calibrate demand measures and add supply-side incentives (e.g., measures to encourage development of underutilized land).\n- On bank support mechanics:\n  - No specific recapitalization design proposed during the press conference; principle is that capital must be provided if private solutions are insufficient.\n\nTranscript of the UK Article IV Mission Concluding Press Conference with David Lipton, May 22, 2013.\n\n---\n\n\n References\n\n- United Kingdom and the IMF\n- United States and the IMF\n- IMF Policy Advice -- A Factsheet\n- Transcripts\n- United Kingdom—2013 Article IV Consultation Concluding Statement of the Mission\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/54/tr052213"
    }
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    "Published: May 22, 2013",
    "Event: IMF Article IV Consultation press conference hosted at the UK Treasury.",
    "Date: May 22, 2013.",
    "Participants: UK Chancellor George Osborne; David Lipton, First Deputy Managing Director of the IMF, and IMF mission team.",
    "Framing: Five years into the global financial crisis; UK especially affected due to its role in the global financial system. IMF conducted a two-week in-depth Article IV mission to assess UK policies and outlook.",
    "Recovery status:",
    "Labor and investment:",
    "Financial intermediation:",
    "Output gap:",
    "Risks from prolonged slack:",
    "Overarching approach:",
    "Monetary policy:",
    "Financial sector policy:",
    "Fiscal policy:",
    "Structural policies:",
    "Infrastructure pipeline: government \"has a roster of about 300 billion pounds of infrastructure projects\" under consideration.",
    "Fiscal drag example: reference to \"the full 10 billion pounds worth of drag this year from the fiscal consolidation\" raised in Q&A.",
    "Infrastructure multiplier: IMF view that infrastructure spending likely yields \"probably a multiplier of 1, possibly higher.\"",
    "Output gap estimate: \"about a four percentage point output gap.\"",
    "Timeframe references:",
    "Monetary policy effectiveness depends on parallel financial-sector repair to restore bank lending capacity.",
    "Fiscal front-loading of capital projects can be fiscally neutral over the medium term yet provide near-term demand support.",
    "Private sector participation is important in selecting and financing infrastructure projects to maximize impact.",
    "Continuous, year-by-year reassessment is recommended: \"we tend to take a country-by-country, year-by-year approach to making such assessments.\"",
    "If recommendations are not adopted:",
    "If recommendations are implemented:",
    "On how much capital spending to bring forward:",
    "On fiscal pacing:",
    "On house-price risks from demand-side stimulus:",
    "On bank support mechanics:",
    "[United Kingdom and the IMF](http://www.imf.org/external/country/GBR/index.htm)",
    "[United States and the IMF](http://www.imf.org/external/country/USA/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Transcripts](https://www.imf.org/en/news/searchnews)",
    "[United Kingdom—2013 Article IV Consultation Concluding Statement of the Mission](https://www.imf.org/external/np/ms/2013/052213.htm)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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