British homeowners face the dismal prospect of an “extended housing market slump”, the International Monetary Fund has warned.
– Debt crisis: UK housing slump will deepen, warns IMF (Telegraph, July 19, 2012):
Despite sharp falls in property prices following the banking crisis, the IMF believes they are still too high and could drop by a further 10-15pc relative to Britons’ salaries.
The bleak forecast was part of a report by the IMF in which it urged the Government to ease austerity measures and deploy a ‘Plan B’ in early 2013 if economic recovery fails to materialise.
Britain’s recovery has stalled with no growth over the past two years, and the Coalition should prepare new growth policies or risk permanent damage to the economy according to the International Monetary Fund.
The IMF said that the British economy may not be able to cope with the scale of austerity planned for 2013-14. It argued in its latest staff report on the UK that the Government has room to relax its deficit cutting programme with targeted tax cuts and increased infrastructure spending should it prove necessary.
“In particular, fiscal adjustment for 2013-14 would need to be scaled back if growth does not build momentum by early 2013.
“Such an acceleration [of austerity] may be difficult for the economy to handle if it remains very weak.”
Ajai Chopra, the IMF’s deputy director of the European department, said the obvious time to address a shift in policy would be spring next year, when George Osborne presents his next Budget.
“[The Budget] would be the natural time to look at the state of the economy and policy responses,” he said.
Earlier this week the IMF slashed its forecasts for growth in Britain by a bigger margin than any other major economy and said yesterday that there were major risks to that outlook posed by the eurozone crisis. It expects the UK economy to grow by just 0.2pc this year, after forecasting 0.8pc growth just three months ago. It has cut its 2013 forecast to 1.4pc from 2pc.