MPs: IMF must not ignore our questions about UK growth forecasts
MPs are continuing their call for officials from the International Monetary Fund (IMF) to be scrutinised in the House of Commons following questions about the influential body’s latest round of forecasts.
Harriett Baldwin, chair of the Treasury Committee, told Morning Wire that she was “hoping to speak to the IMF about their assumptions,” pointing out that the UK “almost always outperforms” the IMF’s forecasts.
In January, the IMF predicted the UK economy would shrink by 0.6 per cent over the course of the year. It now expects it to grow 0.5 per cent.
Although Baldwin hoped to speak to IMF officials, she noted “they have never been willing to be quizzed by on the record”.
Baldwin previously asked to scrutinise figures at the IMF after officials criticised Liz Truss’s mini-budget in comments to the media.
Anthony Browne MP agreed that IMF officials needed to submit to public scrutiny of economic forecasts.
“Its ridiculous that they’re so secretive,” he told Morning Wire “Whether they get things right or wrong they should be willing to speak to democratically elected representatives”.
The comments come as fresh questions are being raised about the IMF’s forecasting methods. In forecasts released yesterday as part of its World Economic Outlook, the Washington-based institution cut its forecasts for the UK’s growth in 2024 to just 0.6 per cent, putting it below other advanced economies.
But questions have been raised about the forecasts. The latest set of forecasts do not factor in the recent revisions to UK GDP since the pandemic, which were released after the end of the IMF’s forecasting period.
These show the UK economy is now thought to be 1.8 per cent larger than it was in the final quarter before the pandemic hit. Previous estimates had suggested that the UK economy had shrunk 0.2 per cent in that period.
Additionally the IMF predicted that the interest rates in the UK would peak at around six per cent, based on market assumptions from the middle of August. Markets now think rates will only go up to 5.5 per cent – if they go up at all.
Simon French, an analyst at Panmure Gordon, said “the forecast looks drunk” and should be “roundly ignored” in favour of more timely forecasts.
Conservative MP Andrea Leadsom meanwhile said the IMF “undermines their own credibility” by using inaccurate data.
“The Treasury Committee has only recently expressed concerns about lack of transparency in IMF forecasting and I would encourage them to make sure the inputs to their modelling are at least accurate,” she told Morning Wire
However, an IMF spokesperson defended the models. While the forecasts did not include the GDP revisions, they noted that their inclusion was unlikely to “significantly affect its near-term economic growth projections”.
On the future path of interest rates the spokesperson said that forecasters had taken into account some of the fall in rate expectations, noting the predicted rate was closer to 5.5 per cent than six per cent.
“If the policy rate remains lower than this level, it could mean a marginal increase in the 2024 growth forecast, although it would also depend on whether the lower rate reflects a weaker economy,” an IMF spokesperson said.