Thursday, September 2, 2010

IMF and UK Deficit

I have just returned from a two week holiday in New York, US. Before the start of term, I took advantage to have a short break from economics. On returning, I see the same issues dominating the headlines.

The IMF have produced a report on UK debt. On the one hand it paints a worrying picture. The forecast for debt to GDP is forecast to rise to 91% of GDP by 2015. According to the IMF, this leaves the UK little room for further crisis.

However, the IMF feels
  • Even 'crisis' countries like Greece, Portugal, Spain, and Ireland are unlikely to default on debt. "In our view, the risk of debt restructuring is currently significantly overestimated." The IMF feel markets may have overreacted on risk of debt.
  • Also, the IMF warn against 'quick fixes' i.e. Slashing spending when economic growth is fragile. The solution to national debt requires a long term restructuring of tax and spending. Hopefully, this is a point, that the current government will not forget - see: Debt and deflation
Further Reading

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