Stabilisation of House Prices to Bring about Recovery of UK Economy – IMF

In its recent statement, the International Monetary Fund (IMF) reviewed its forecast for the British economy, suggesting that it will recover faster than expected. The major reasons for the reviewed forecast lie in the recent improvements seen in the property market and in increased export levels, caused by weaker pound. According to the IMF, British GDP will rise by 0.9% in 2010, which compares to 0.2% forecasted earlier. Moreover, it said that the positive change in the country’s gross domestic product will start as early as in the 2nd quarter of 2009, driven by stabilisation of property and financial markets. More positive news also came this month from the Bank of England, which claimed that the British economy will recover as a result of increased asset prices. GfK NOP, one of the leading research agencies, supported this view by saying that in September consumer confidence in the UK saw the biggest increase ever since 1995. In his yesterday’s statement, Mr. Alistair Darling, Chancellor of the Exchequer, said that the IMF’s reviewed forecast for 2010 only proves the view, widely held by the British Government, that the UK economy will rebound by the end of 2009. Yesterday, on October 1st, the Bank of England also published a report, according to which UK banks will increase mortgage lending in the 4th quarter of this year as house prices have been continuously recovering in the past months and no negative changes in this sector are expected. According to Mr. David Miles, policy maker, the purchases of banks’ assets will totally depend on the inflation rate in the near future; he added that the Bank of England has no intentions to lower the deposit rate either.