## Managing Director’s Remarks Opening at the UK’s 2021 Article IV and Financial Sector Assessment Program

_IMF News, December 14, 2021_

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## Bibliographic details
- Published: December 14, 2021

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### Overview
- Remarks delivered by Kristalina Georgieva on December 14, 2021, opening the UK’s 2021 Article IV and Financial Sector Assessment Program (FSAP).
- FSAP for the UK was last done in 2016.
- Key contextual points:
  - The UK experienced a difficult year with the pandemic and post-Brexit adjustments but proved more resilient than expected.
  - Resilience attributed to a rapid vaccination campaign and strong coordinated policy support.
  - Output and employment have returned close to pre-pandemic levels despite ongoing headwinds.
  - Financial stability has been preserved; UK’s strong policy frameworks were critical to enabling the policy response.
  - Covid-19 continues to strain supply chains, contribute to rising prices, and tighten labor markets; a new variant (Omicron) raises uncertainty and complicates policymaking.

### Near-term macroeconomic outlook and key figures
- Growth projections and inflation:
  - "about 6.8 percent in 2021 and 5 percent in 2022" consistent with the October WEO projections.
  - Inflation pressures will linger into 2022, estimated to peak at "about 5½ percent."
  - Omicron will have some near-term impact and brings considerable uncertainty.
- Policy guidance (summarized advice):
  - Monetary policy:
    - "Monetary policy needs to withdraw the exceptional support provided during 2020."
    - Pace of withdrawal should weigh risks to inflation and growth.
  - Fiscal policy:
    - "Fiscal policy should retain an important role in responding to large shocks."
    - There is now a playbook for using fiscal support in the event of new widespread mandated closures for health reasons.
    - Fiscal policy "could also have a role in responding to present supply-demand imbalances."
  - Macroprudential policy:
    - "Macroprudential polices will need to maintain strong vigilance in a period where real interest rates are low and risk taking high."

### Managing policies in a context of higher volatility
- Macroeconomic landscape likely to be more volatile going forward.
- Fiscal policy role:
  - "Fiscal policy has a key role to play in addressing volatility through automatic stabilizers."
  - Automatic stabilizers are already high in the UK.
  - Pandemic support policies in the skills-building and small business areas "should be evaluated as options for more of a more permanent status."

### Anchoring policies and preserving space through strong frameworks (FSAP findings)
- Financial soundness:
  - FSAP found that "the financial soundness of UK banks and insurers has increased since the global financial crisis."
  - "The system is better placed today that at the time of the 2016 FSAP to face near-term macrofinancial challenges."
- Structural transitions and FSAP deep dives:
  - The UK financial system is undergoing several important structural transitions.
  - FSAP examined climate-related financial risks and disclosures.
- Suggested policy enhancements from the FSAP:
  - Continued expansion of "the scope and perimeter of systemic risk monitoring and analysis."
  - Address "the data gaps for effective oversight of cross border nonbank (NBFI) risks."

### Building Back Better — growth strategy and Net Zero
- Authorities have proposed and funded a comprehensive growth strategy.
- IMF welcomes growth pillars covering:
  - infrastructure,
  - skills,
  - innovation;
  - and strategies such as "Leveling Up and Net Zero."
- Recommendations:
  - "Options to scale up efforts further should be pursued, supported by raising additional revenues."
  - The "Net Zero Strategy is a major achievement" and authorities are encouraged to "deliver at the ambitious end of the spectrum."

### Conclusion and highlights
- Despite the renewed surge in Covid-19 cases, the UK has advanced in many respects versus this time last year:
  - Successful vaccination campaign—now focused on booster shots.
  - The Trade and Cooperation agreement reached with the EU.
  - A much stronger economy and labor market than expected.
- Final assessment: with continued collaboration and strong solidarity, the United Kingdom can "build forward better, creating an economy that is more resilient, sustainable, and inclusive."

*Managing Director’s Remarks Opening at the UK’s 2021 Article IV and Financial Sector Assessment Program, December 14, 2021*

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## References

- [https://www.imf.org/en/about/senior-officials/bios/kristalina-georgieva](https://www.imf.org/en/about/senior-officials/bios/kristalina-georgieva)
- [United Kingdom and the IMF](http://www.imf.org/external/country/GBR/index.htm)
- [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)
- [Financial Sector Assessment Program (FSAP)](https://www.imf.org/external/np/fsap/fsap.aspx)
- [Speeches](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2021/12/14/sp121421-md-opening-remarks-uk-article-iv-and-fsap_