IMF quick to contradict bullish Budget forecast

IMF quick to contradict bullish Budget forecast




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Alistair Darling had barely sat down yesterday before the country’s financial and analytical experts pounced on his positive projection for British economy outlook. 

The Chancellor had said during his Budget speech yesterday that although the UK economy will contract by 3.5% this year – far worse than he had suggested in his pre-Budget report – it would pick up as we enter 2010, with a 1.25% growth next year and a 3.5% growth from 2011 onwards.
 
However, economists quickly poured scorn on these wildly optimistic predictions.
 
The IMF estimated that there would be a 4.1% drop in output this year, followed by a further 0.4% fall next year.
 
Chief economic adviser to the Ernst & Young Item Club, Peter Spencer, said: “It’s just wishful thinking. It's impossible to find a period when that sort of recovery has actually come through…if you believe that, you'll believe anything.”
 
It would seem that in order to satisfy such bullish projections, not only would a total consumer recovery have to take place, it would have to be another boom. Conservative leader David Cameron commented: “This wouldn’t be a U-shaped recovery; this would be a trampoline recovery.”
 
Mr Darling outlined plans to borrow a record £175 billion next year and a total of £703 billion over five years, making public debt rocket to £1.4 trillion – 79% of gross domestic product.
 
Many were shocked by the move to hit those earning over £150,000 a year with a 50% top rate tax as of next April. Economists have anticipated another “brain drain” on Britain as high-earners and investors vote with their feet and establish their businesses in a country with a more attractive tax rate.

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