UK economy risks permanent damage: IMF

In its annual report on Britain, the IMF urged the British government to step up public investment instead of cutting public spending. Moreover, it suggested that the Bank of England cut its base interest rate.

“We expect the economy to grow only modestly, slowed by weak demand due to low confidence, the uncertainty due to tensions in the euro area, tight credit conditions,” and lower spending from the government, said Ajai Chopra, deputy director of the IMF’s European Department.

The warning from the Fund comes one day after British Prime Minister David Cameron said he “can’t see any time soon” when the country’s austerity program would come to an end.

“I don't see a time when difficult spending choices are going to go away ... we are in a very difficult situation”, Cameron said in an interview with The Daily Telegraph.

Moreover, last week, Britain’s Office for Budget Responsibility (OBR) announced British people could face decades of painful austerity.

This comes as Britain’s austerity program, which the coalition government launched after it took office in 2010, was initially planned to take five years, eliminating the country’s record peacetime structural budget deficit by 2015.

ISH/MA/HE