Global economic risks are rising and Britain will not be immune, George Osborne has said in response to warnings from the International Monetary Fund over the potential for another crash.
The chancellor said the Greek debt crisis remained a threat to the eurozone alongside the fallout from tumbling commodity prices and high debt levels in some countries. But he said concern about the slowdown in China should not be overdone, since it was still contributing solidly to global growth.
Speaking at the IMF’s annual meeting in Lima, Peru, he said: “It’s very clear from this IMF meeting the risks in the global economy are rising. While there are brighter spots like the US and the UK, and some emerging economies like India, overall the latest news, in our view, is concerning.”
While China’s growth is slowing, its economy is forecast to continue expanding at a rapid rate over the next few years. He said that even if it grew at somewhat less than the usual 7%, it would be adding in the next five years the equivalent of the Japanese economy to global GDP.
“So it’s an enormous, still, contributor to global growth,” he said, adding that it was notable that the IMF’s outlook this month had not downgraded its forecast for China.
The IMF lowered its forecast for global growth to 3.1% in its latest economic health check. It also warned that the risks of another financial crash were heightened after the the threat of increasing interest rates and a slowdown in China sent shockwaves across financial markets.
IMF boss Christine Lagarde said these two factors were likely to be features of the global economy for some time and would generate uncertainty as the growth patterns of developed and developing countries diverged.
She said an overall slowdown was not inevitable if governments acted to support growth and reduce debt.
Osborne, who is backing Lagarde in her bid to serve a second five-year term as managing director of the IMF, said the threats highlighted by the IMF were all the more reason to deliver his economic plan to fix the UK’s public finances, improve productivity and invest in infrastructure.
He said the IMF saw the UK going from having the second-worst public finances in the G7 to the second best by 2020.
Osborne believes the UK is in much better position than five years ago to handle whatever the global economy throws at it.
