Disappointing growth in the first half of 2005 has led the IMF to cut its estimate for U.K. growth for the rest of the year and in 2006, according to the International Monetary Fund's semiannual report on the global economy.
The report could rekindle tension between Gordon Brown, the British chancellor of the exchequer, and the IMF staff. In April, Brown flatly rejected IMF analysis of the British economy, arguing that the IMF had consistently been wrong in its analysis.
U.K. GDP is now projected at 1.9% in 2005, down from the previous estimate in April of 2.6%. The economy is expected to recover to a 2.2% growth rate in 2006, but this is lower than the previous estimate of a 2.6% rate.
Weakening in the housing market has also played a role, the IMF said. The IMF said the recent rate cut by the Bank of England was appropriate, but it said future moves should depend on incoming data. "Overall growth in the U.K. is still quite solid by European standards," said David Robinson, a deputy IMF economist.
The IMF repeated its call for "gradual, modest" fiscal consolidation to ensure that the government's fiscal rules can be met, MarketWatch reports.