The Government’s austerity package remains the right thing to do, the head of the International Monetary Fund said in a boost for Chancellor George Osborne.
Christine Lagarde firmly backed maintaining the deficit-cutting measures, despite the threat of recession and economic forecasts being revise downwards.
Figures released on Wednesday showed the economy shrank by 0.2 per cent in the final quarter of last year – slightly more than anticipated.
The IMF has dropped its forecasts for UK growth to only 0.6 per cent for this year, down from 1.6 per cent. Remarks by its chief economist Olivier Blanchard that the UK might have to consider slowing the speed of cuts if growth proved to be “dismal” were seized on by Shadow Chancellor Ed Balls as backing for Labour’s demands for a change of direction.
When asked in a BBC radio interview if she thought that was something the IMF would be happy to see, Ms Lagarde replied the policy in place was the right one.
She went on: “Under the current circumstances, the policy in place that consists of letting the automatic stabilisers move without readjusting and tightening the principles is the right thing to do.”