UK’s economic weak spot: IMF says build more homes
BRITAIN is growing faster than any other major European economy, the International Monetary Fund (IMF) said yesterday, but needs to build more homes to address the supply crisis in the sector.
GDP is set to grow by 2.7 per cent this year and 2.3 per cent next year, well ahead of the 1.5 per cent and 1.6 per cent growth in the Eurozone.
In the developed world, only the US wil growing faster, overtaking the UK to grow by 3.1 per cent in both 2015 and 2016.
But economists highlighted two specific weaknesses in the British growth story – housing and the oil and gas industry.
“Containing financial stability risks from housing and mortgage markets remains important,” said the IMF’s World Economic Outlook.
“Measures to increase housing supply are a priority in the United Kingdom,” it said.
The intervention comes at a sensitive time in the General Election campaign, with political leaders offering more construction despite tight planning laws.
The IMF also said the North Sea oil industry could face a prolonged depression.
Low oil prices overall provide a boost to the economy, as fuel bills fall and the knock-on effect of lower transport costs give households a helping hand. But they are damaging for British oil producers.
“Canada, the North Sea and the United Kingdom are among the most expensive places to operate oil fields,” the report said.
“As a result, the oil price slump will affect production in those locations earlier and more intensely than in other locations.”
By contrast, extraction costs in the US’ shale industry are lower and more flexible.
However, the IMF still chopped its US growth forecast sharply, from 3.6 per cent for 2015 to 3.1 per cent. The prediction still represents an acceleration from the 2.4 per cent growth of 2014, but is a smaller increase than had been forecast in January.
The strength of the dollar is one key factor, as it makes American firms’ products more expensive in other currencies, hitting their exports.