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IMF warns of slow growth due to deficit cutting

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by Kay Mitchell

The International Monetary Fund (IMF) has today warned that economic growth will be hit due to deep spending cuts.

Olivier Blanchard, the IMF’s chief economic counsellor, said massive spending cuts may have to be revisited if growth in the UK is hampered.

However, Mr Blanchard did highlight that his comments applied to all advanced economies, not just the UK.

Many economists have previously warned that cutting deficits too quickly could pose a threat to the recovery of many economies throughout the world, pushing them into a double dip recession.

As a result of the deep spending cuts, the IMF said the global economy will experience slower growth next year.

It is forecasting GDP would expand by 4.2% in 2011 – slightly lower than an earlier forecast of 4.3%.

For the UK, meanwhile, the IMF reduced its growth forecast for 2011 from 2.1% to 2% – this is in line with a recent forecast from the UK’s Office for Budget Responsibility.

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News posted: October 6, 2010

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