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Underestimated strength of UK economy:International Monetary Fund

June 8, 2014

Bloomberg News

London: The International Monetary Fund (IMF) underestimated the strength of the UK economy when warning against the government's austerity programme, said managing director Christine Lagarde.

"We got it wrong," Lagarde told the 'Andrew Marr Show' on BBC Television on Sunday. "We acknowledged it. Clearly the confidence building that has resulted from the economic policies adopted by the government has surprised many of us."

A year since the IMF's chief economist, Oliver Blanchard, said UK budget cutting risked 'playing with fire', the Washington-based lender said in April the UK economy will grow 2.9 per cent this year, the fastest pace among the Group of Seven nations.

Pressed by Marr on whether she had apologized to Chancellor of the Exchequer George Osborne, Lagarde stopped short of saying so and asked "Do I have to go on my knees?"

"We said very clearly that we had underestimated growth for the UK and that our forecasts had been proven wrong by the reality of economic developments," she said.

Housing market

Lagarde said the UK economic outlook was now 'more sustainable' as investment joins consumption as an engine. She reiterated the strength of the UK housing market remains a threat although she said its rise was 'multi-faceted' rather than an outright boom.

Distancing herself from a European Commission call for higher taxes in the UK, Lagarde said the IMF doesn't "see a massive increase in tax as recommendable."

Lagarde, a former finance minister of France, again sought to play down the chance she will become president of the commission without ruling out the chance completely. "I have a job," she said. "I'm not a candidate to any other position."

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Source: Times of Oman

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