It seems that the Chancellor now has two favourite soundbites – ‘we’ve reduced the deficit by a quarter’ and ‘the economy is healing’. Both are quite effective lines, and I rather imagine they’ve been heavily focus-grouped, road-tested and are highly calibrated.
The only real problem with these these lines is that neither is actually true.
And today the IMF effectively has weighted in on the idea that ‘the economy is healing’.
If the economy were indeed in healing mode then one might reasonably expect the IMF to start upgrading it’s forecasts for growth in 2012 and 2013 – or at the very least to stop cutting them.
Instead today the Fund has said it now expects the UK economy to contract by 0.4% this year and to grow by just 1.1% in 2013.
The graph below plots the IMF forecasts for 2012 and 2013 growth over the past year (taking in the World Economic Outlook forecasts of today, July 2012, April 2012 and September 2011).
Just over a year ago the IMF expected the economy to grow by 1.6% this year and by 2.7% next.
The picture isn’t one of an economy that is healing, it’s of one that is very much still weakening.
(As a footnote the most important thing in today’s IMF report was it effectively revising its views on the impact of fiscal consolidation – Jonathan Portes has covered this in detail).