{ "title": "IMF Executive Board Concludes 2024 Article IV Consultation with the United Kingdom", "publication": "IMF News, July 8, 2024", "sourceUrl": "https://www.imf.org/en/news/articles/2024/07/03/pr-24259-uk-imf-concludes-2024-article-iv-consultation", "canonical": "https://www.imf.org/en/news/articles/2024/07/03/pr-24259-uk-imf-concludes-2024-article-iv-consultation", "overlayPath": "/en/news/articles/2024/07/03/pr-24259-uk-imf-concludes-2024-article-iv-consultation/index.md", "summary": "The economy is approaching a soft landing, with growth recovering faster than expected after a mild technical recession in 2023", "publishDate": "2024-07-08", "sections": [ { "heading": "Outlook: growth and inflation", "content": "- \"The economy is approaching a soft landing, with growth recovering faster than expected after a mild technical recession in 2023.\"\n- Growth projections:\n - Real GDP growth (%): 0.1 (2023, Est.); 0.7 (2024, Projections); 1.5 (2025, Projections); 1.7 (2026, Projections)\n- Inflation dynamics:\n - Inflation, annual average (%): 7.3 (2023); 2.7 (2024); 2.1 (2025); 2.0 (2026)\n - Inflation is forecast to temporarily rise from \"around 2 percent presently to 2.5 percent by end-2024, due to regulated energy price base effects, before returning durably to 2 percent in early 2025.\"\n- Drivers:\n - Disinflation buoys real incomes, monetary policy easing, and more accommodative financial conditions underpin the projected acceleration to 1.5 percent in 2025.\n - Rapid fall in inflation from last year’s double-digit levels attributed to reversal of the energy price shock and demand impact of tight monetary policy." }, { "heading": "Risks and scenarios", "content": "- Risks to growth and inflation are \"balanced.\"\n- Short-term scenarios:\n - Downside: growth could be lower if the anticipated pick-up in consumption from current weak levels does not materialize.\n - Upside: growth could be higher if there are stronger-than-expected second round effects from falling energy prices (this also represents a downside risk to inflation).\n - Alternative risk: stronger wage pressures could lend greater persistence to services inflation, with possible repercussions for growth as monetary policy adjusts.\n- Medium-term risk:\n - Key downside risk is that productivity and labor supply disappoint relative to expectations.\n - Upside potential from \"bold implementation of ambitious structural reforms and AI adoption.\"" }, { "heading": "Executive Board assessment — monetary policy", "content": "- Directors recognized the economy is approaching a soft landing and welcomed the rapid decline in inflation since last summer.\n- Monetary stance and guidance:\n - Directors agreed that with the monetary policy stance reaching a turning point, the risks of premature versus delayed easing should be appropriately balanced.\n - They welcomed the Monetary Policy Committee’s meeting‑by‑meeting approach to adjusting rates as appropriate given prevailing uncertainty.\n - Noted that \"a press conference after each rate decision could be beneficial\" for communication, particularly amid divergence from US interest rate paths.\n - Emphasized importance of articulating a clear rationale for future Quantitative Tightening (QT) plans as the BoE’s balance sheet approaches its steady‑state size.\n - A few Directors supported the high‑level principles proposed by staff for BoE capital policies in future rounds of Quantitative Easing/QT.\n - Directors welcomed the BoE’s commitment to act on the recommendations of the Bernanke Review." }, { "heading": "Executive Board assessment — fiscal policy", "content": "- Directors agreed the main medium‑term challenge is to better account for public spending needs while stabilizing public debt.\n- Fiscal stance and recommendations:\n - Fiscal policy has remained tight, continuing to target medium-term debt stabilization, although the last two budgets included tax cuts aimed at boosting investment and labor supply.\n - Directors observed that absent a substantial boost to potential growth, stabilizing public debt will require difficult tax and spending choices.\n - Possible revenue-raising measures noted: stronger carbon taxation and road‑usage taxation, broadening the base of VAT and inheritance tax, reforming capital gains and property taxation.\n - On spending, Directors saw scope for savings from reforms to the state pension and noted that any expansion or increase in user charging for public services should effectively protect the vulnerable.\n - They encouraged the authorities to strengthen the United Kingdom’s fiscal framework." }, { "heading": "Executive Board assessment — structural policies and climate", "content": "- Directors emphasized need for more ambitious structural reforms to boost potential growth.\n- Recommendations and priorities:\n - Support for adoption of a stable, long‑term growth strategy, backed by an independent growth commission.\n - Particular focus on easing planning restrictions, upskilling the workforce, and improving health outcomes to boost weak productivity growth.\n - Encouraged continued cautious approach to industrial policy and constructive participation in the WTO.\n - Welcomed progress in reducing carbon emissions and urged staying the course on climate policy.\n - Recommended adequate public investment to support the green transition, stronger feebates to hasten transition to heat pumps and electric vehicles, and strengthening of emissions trading to support the carbon price." }, { "heading": "Executive Board assessment — financial sector and supervision", "content": "- Directors noted continued resilience of the financial sector and that financial stability risks appear well contained at this time, but careful monitoring is warranted.\n- Supervisory priorities and initiatives:\n - Ongoing strong supervision of banks and NBFIs encouraged.\n - Welcomed BoE initiatives to mitigate NBFI risks, including the system‑wide exploratory scenario exercise and the design of a backstop lending tool.\n - Encouraged continued progress in closing data gaps.\n - Welcomed preservation of primacy of financial stability objectives in the Edinburgh reforms but urged continued vigilance.\n - Enhancing the effectiveness of the AML/CFT supervisory regime remains important." }, { "heading": "Structural headwinds and labor market", "content": "- Longer-term growth prospects subdued due to:\n - Weak labor productivity growth.\n - Population aging.\n - \"Somewhat higher than expected inactivity levels due to long term illness, only partly offset by higher migration numbers.\"\n - Elevated pressures on public services, notably in health, amidst ongoing industrial action over pay.\n- Policy measures to boost productivity have been implemented but \"will not be sufficient to lift productivity to close to pre-GFC levels.\"\n- Post‑Brexit context:\n - Post‑Brexit uncertainty has continued to ease in context of progress on Irish border arrangements, review of retained EU laws, and resilience in UK services exports.\n - UK firms trading with the EU are still adapting to the post‑Brexit arrangement." }, { "heading": "United Kingdom: Selected Economic Indicators", "content": "- Population (million): 68.1\n- Per capita GDP (US$): 49,049\n- Key export markets: Euro area (36%); US(21%)\n- Output\n - Real GDP growth (%): 0.1 (2023, Est.); 0.7 (2024, Projections); 1.5 (2025, Projections); 1.7 (2026, Projections)\n- Unemployment\n - Unemployment (%): 4.0 (2023, Est.); 4.2 (2024, Projections); 4.1 (2025, Projections)\n- Prices\n - Inflation, annual average (%): 7.3 (2023); 2.7 (2024); 2.1 (2025); 2.0 (2026)\n - Inflation, end-of-period (%): 2.5 (2024)\n- Public sector finances (fiscal year)\n - Revenue (% GDP): 40.6 (2023); 40.3 (2024); 40.5 (2025)\n - Expenditure (% GDP): 44.8 (2023); 43.7 (2024); 43.5 (2025); 43.4 (2026)\n - Public sector overall balance (% GDP): -4.2 (2023); -3.4 (2024); -3.2 (2025); -2.9 (2026)\n - Public sector cyclically adjusted primary balance (staff estimates): -1.0 (2023); -0.7 (2024); -0.1 (2025)\n - Public sector net debt (excl. BoE) 2/: 89.2 (2023); 91.6 (2024); 93.1 (2025); 94.5 (2026)\n- Money and Credit\n - Broad money (% change): -0.9 (2023)\n - Credit to the private sector (% change): 0.2 (2023)\n - 3-month interbank rate (%): 5.0 (2023)\n- Balance of Payments\n - Current account balance (% GDP): -3.3 (2023); -3.5 (2024)\n - Reserves (end-of-period, billions of US dollars): 190.5 (2023)\n - Net international investment position (% GDP): -30.7 (2023)\n- Exchange Rates\n - REER (% change) 1/: (data not shown in table)\n- Notes:\n - Sources: Bank of England; HM Treasury; IFS; INS; ONS; and IMF staff estimates.\n - 1/ Based on relative consumer prices. An increase denotes an appreciation.\n - 2/ Public sector net debt is defined as public sector gross debt minus liquid assets held by general government and non-financial public corporations. It excludes Bank of England operations. The fiscal year begins in April.\n\nIMF Executive Board press release, July 8, 2024.\n\n---\n\n\n References\n\n- United Kingdom and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.IMF.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2024/07/03/pr-24259-uk-imf-concludes-2024-article-iv-consultation" } ], "bullets": [ "[Markdown version](/en/news/articles/2024/07/03/pr-24259-uk-imf-concludes-2024-article-iv-consultation/index.md)", "[Structured JSON version](/en/news/articles/2024/07/03/pr-24259-uk-imf-concludes-2024-article-iv-consultation/index.json)", "[Bundle manifest](/en/news/articles/2024/07/03/pr-24259-uk-imf-concludes-2024-article-iv-consultation/bundle-manifest.json)", "Published: July 8, 2024", "\"The economy is approaching a soft landing, with growth recovering faster than expected after a mild technical recession in 2023.\"", "Growth projections:", "Inflation dynamics:", "Drivers:", "Risks to growth and inflation are \"balanced.\"", "Short-term scenarios:", "Medium-term risk:", "Directors recognized the economy is approaching a soft landing and welcomed the rapid decline in inflation since last summer.", "Monetary stance and guidance:", "Directors agreed the main medium‑term challenge is to better account for public spending needs while stabilizing public debt.", "Fiscal stance and recommendations:", "Directors emphasized need for more ambitious structural reforms to boost potential growth.", "Recommendations and priorities:", "Directors noted continued resilience of the financial sector and that financial stability risks appear well contained at this time, but careful monitoring is warranted.", "Supervisory priorities and initiatives:", "Longer-term growth prospects subdued due to:", "Policy measures to boost productivity have been implemented but \"will not be sufficient to lift productivity to close to pre-GFC levels.\"", "Post‑Brexit context:", "Population (million): 68.1", "Per capita GDP (US$): 49,049", "Key export markets: Euro area (36%); US(21%)", "Output", "Unemployment", "Prices", "Public sector finances (fiscal year)", "Money and Credit", "Balance of Payments", "Exchange Rates", "Notes:", "[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)", "[Press Releases](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2024/07/03/pr-24259-uk-imf-concludes-2024-article-iv-consultation/index.md", "json": "/en/news/articles/2024/07/03/pr-24259-uk-imf-concludes-2024-article-iv-consultation/index.json", "bundleManifest": "/en/news/articles/2024/07/03/pr-24259-uk-imf-concludes-2024-article-iv-consultation/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T03:10:10.524Z" }