IMF chief Lagarde praises UK economic growth

Christine Lagarde, head of the IMF, says UK economic growth serves as an example to others.

Britain’s economic recovery provides an “eloquent and convincing” example to the rest of the European Union, the head of the International Monetary Fund (IMF) has said.

Christine Lagarde said the UK had shown clear leadership and that the economic recovery was “exactly the sort of result” she would like to see.

It comes just less than two years after the organisation’s chief economist, Olivier Blanchard, warned the British government about its deficit reduction plan and said the chancellor, George Osborne, was “playing with fire”.

In June of last year the IMF was forced to admit its forecasts were wrong as the UK economy picked up and growth accelerated at the fastest rate of any developed nation in the G7.

Speaking at a roundtable in New York this week, Ms Lagarde said: “The UK is leading in a very eloquent and convincing way in the European Union.

“Certainly from a global perspective this is exactly the sort of result that we would like to see … More growth, less unemployment, a growth that is more inclusive, that is better shared, and a growth that is also sustainable and more balanced.”

Risks remain

Whilst praising the UK economy for delivering a stronger performance in 2014, there are a number of risks to global growth.

“Overall, we believe that global growth is still too low, too brittle, and too lopsided. Moreover, there are significant risks to the recovery,” said Ms Lagarde.

She highlighted “asynchronous normalisation of monetary policies in advanced economies” as a potential threat. It comes after the Swiss National Bank removed its euro peg floor, a move that the IMF chief admitted was “a bit of a surprise”.

Meanwhile, emerging and developing economies could face a triple whammy of a rising US dollar, higher global interest rates, and more volatile capital flows.

There is also a substantial risk that the euro area and Japan could remain “stuck in a world of low growth and low inflation for a prolonged period”. Finally heightened geopolitical risks, such as the continued standoff in Ukraine, remain a concern.