The IMF said Grenada’s economy could grow by 4 percent this year.
WASHINGTON, United States (AFP) — Britain, with a new Labour government in power, faces tough choices due to high levels of public debt, the International Monetary Fund (IMF) warned on Monday.
“The main challenge for fiscal policy in the medium term is to better take into account the need for public spending while ensuring that public debt remains stable,” according to the Washington-based institute.
The warning was issued as part of the IMF’s annual review of the country’s economic and financial situation (Article IV consultation).
“Without a substantial increase in potential growth, stabilizing public debt will require difficult tax and spending choices,” the IMF said.
The IMF said chronic financing shortfalls and an ageing population meant big investments, particularly in health, were needed, as well as “more ambitious structural reforms to lift potential growth”.
But the IMF also stressed the need to keep public debt under control as it approaches 100 percent of the country’s GDP.
Among the measures that could be taken to address this dual challenge, the IMF noted the possibility of increasing government tax revenues through higher carbon, inheritance and wealth taxes, as well as broadening the VAT base.
The IMF predicted a “soft landing” after a brief slowdown at the end of last year but also sounded cautious, predicting that long-term growth will be slow due to sluggish productivity growth, an aging population and high levels of non-participation in the labor force.
Meanwhile, the IMF said that while post-Brexit shockwaves are still felt, increased immigration has so far helped offset these negative effects, though they are gradually fading over time.
The IMF has seen inflation return to its target and expects a modest rise to 2.5% by the end of the year, but this is likely to be only temporary.
The UK economy is expected to grow by 0.7% this year, accelerating to 1.5% in 2025 and 1.7% in 2026, after growing almost zero in 2023.
On Friday, Britain began a new chapter in history when Keir Starmer’s Labour Party won a landslide victory in the general election, bringing to an end 14 years of Conservative rule.
Rachel Reeves, the first woman to become finance minister, said on Monday that economic growth needed to be stimulated by accelerating the construction of infrastructure, particularly onshore wind power and housing.
