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IMF ''clearly underestimated'' UK - Lagarde

Friday, June 06, 2014 - 02:37

June 6 - Christine Lagarde delivers the IMF's assessment of the UK and drops its criticism of British economic policy - but while red-hot house prices now even have UK finance minister, George Osborne, expressing concern. David Pollard reports

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They haven't always been the best of friends. Especially after the IMF accused the UK of ''playing with fire'' over its deficit reduction programme. That was just over a year ago. The IMF may have got it wrong, according to managing director, Christine Lagarde. SOUNDBITE (English) CHRISTINE LAGARDE, IMF DIRECTOR, SAYING: ''I am happy to come back yet again and say that we had clearly underestimated the growth of the UK economy in our forecast a year ago. OK?'' Unlike with many other developed economies, the IMF hasn't revised down UK growth in its latest forecasts. In fact, latest UK data is, says Lagarde, ''good news''. Though not all of it. SOUNDBITE (English) CHRISTINE LAGARDE, IMF DIRECTOR, SAYING: ''There is no room for complacency, as there are risks looming on the horizon. On the domestic front, productivity remains weak, and house price inflation is broadening.'' British house prices saw their biggest monthly jump in more than 11 years in May, according to one measure. London in particular swamped by reports of would-be owners cueing for viewings. Red hot prices prompting the UK finance minister, George Osborne, to join the IMF in calling for more action from the Bank of England. SOUNDBITE (English) GEORGE OSBORNE, UK FINANCE MINISTER, SAYING: ''That's why I have given the Financial Policy Committee new macro-prudential tools should they see a risk to financial stability - and as I've made clear that includes recommendations to me on the parameters of the Help to Buy scheme.'' Reining in riskier mortgages should be one measure to bring things under control, according to the IMF. Not everyone sees the need - some in the markets say if anything, demand could be cooling. Philip Shaw of Investec. SOUNDBITE (English) PHILIP SHAW, CHIEF ECONOMIST, INVESTEC, SAYING: "There is a lot of hype about the UK housing market. But if you look at transactions numbers, they are still below the long-term average and at least indeed on one of the main lender's measures, the Nationwide House Price Index, that's on a nationwide basis still below the 2007 peak.'' As for Lagarde herself, there has been speculation Germany might see her as a suitable candidate in the race for European Commission president. SOUNDBITE (English) CHRISTINE LAGARDE, IMF DIRECTOR, SAYING: ''On this EU thing, as I said, I am not a candidate, I have a job, I happen to think that it's a rather important job and I intend to complete my term.'' A disappointment for some maybe - though not perhaps for the frontrunner for the job, Jean-Claude Juncker.