Managing Director’s Opening Remarks at United Kingdom Article IV Press Conference

IMF News, October 29, 2020

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Canonical URL: Managing Director’s Opening Remarks at United Kingdom Article IV Press Conference

Date: October 29, 2020
Format: Virtual meetings for the Article IV consultation for the British economy.
Pandemic situation described: "the worst pandemic in a century," with "an enormous human toll and caused unprecedented economic disruption," and "we are seeing a second wave hitting Europe."
Media contact provided: Phone: +1 202 623-7100; Email: MEDIA@IMF.org

Recognition of "enormous efforts the UK authorities have made to contain the impact of the pandemic."
Fiscal, monetary, and financial sector support measures described as "unprecedented" and among "one of the best examples of coordinated action that we have seen globally."
Specific policy refinement noted: adaptations to the Jobs Support Scheme announced last week.
Outcomes credited to support measures:
- helped to sustain incomes,
- keep unemployment down,
- curb corporate insolvencies.

Core assertion: "continued policy support is essential to address the pandemic and to sustain and invigorate a recovery."
Authorities welcomed for committing "to deliver it as long as necessary to manage expectations and boost confidence."
Statement: "The policy space exists to do this."

Key recommended policy directions (three highlighted points)

First:
- Keep the special job and company support programs in place "until the direct impact of the pandemic on the economy subsides."
- Rationale: "This extended safety net will reduce scarring and temper the unequal effects of the crisis, and it can naturally sunset as the pandemic fades."
- Support an additional fiscal push to:
- enhance the safety net,
- boost public investment,
- "build forward" to address the UK’s climate targets,
- reduce regional inequality,
- help those who do end up losing their livelihood.
Second:
- While policy rotation toward fiscal adjustment is not thought to be imminent, it "cannot be ignored either."
- It will be essential to stabilize then reduce public debt ratios and begin to rebuild buffers.
- Guidance: rotation to fiscal consolidation should only happen "once the private sector has durably picked up steam."
Third:
- Monetary policy should remain accommodative due to "the significant risk that inflation will undershoot targets."
- Recommended actions:
- scale up government bond purchases,
- consider other tools like negative rates after further understanding is developed on their application in the UK context.

Strong encouragement for the UK and EU authorities "to make every effort to reach an agreement."
Observation: "Progress on a range of issues has been made over the past year and there is room for a compromise beneficial to both sides."
Policy implication: "A solution would remove important downside risks from the outlook."
Preparatory advice: "Regardless of the outcome, it will be important to prepare the economy, firms, and people."

The UK entered 2020 with advantages:
- "strong institutions,"
- "highly credible fiscal and monetary policy frameworks,"
- "flexible labor markets;"
- households and corporations "have strengthened their balance sheets since 2008;"
- "banks remain well capitalized and liquid."
Confidence statement: "The UK has always risen to the challenges confronting it, and we have no doubt it will respond to the present challenges with its usual resolve."
Recognition of UK global leadership:
- on the COVID response, including vaccines,
- contributions provided to the IMF for "our low-income lending facilities, and for debt relief."
- These contributions "will provide us with resources to help the least developed countries" and "helping them will also help reduce global instability for the benefit of all."

Managing Director’s Opening Remarks at United Kingdom Article IV Press Conference, October 29, 2020