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Four questions answered on the IMF lower global growth forecast

The IMF lowered its estimates for global growth: what does this mean?

In Tokyo last night the international Monetary Fund ahead of the IMF-World Bank 2012 Annual Meetings downgraded its estimates for global growth – but what does this actually mean?

What have the IMF actually said? 

The IMF Chief Economist Oliver Blanchard said: “Low growth and uncertainty in advanced economies are affecting emerging market and developing economies through both trade and financial channels, adding to homegrown weaknesses.”

The IMF also added: "In advanced economies, growth is now too low to make a substantial dent in unemployment."

What does this mean?

It means global growth has stunted and the IMF now predict the global economy to grow by 3.6 per cent instead of 3.9 per cent as previously estimated in July. One of the most significant downgrades was in the UK, where the IMF expects the economy to shrink by 0.4 per cent this year.

What factors have contributed to this new rating? 

Continued economic crises in the Eurozone, which is expected to shrink by 0.7 per cent this year, a credit cycle downturn in Asia and Latin America, slow growth in America and a significant slow down in growth from China.

What is the IMF’s advice for growth?

The IMF has said Europe must stand behind a summit pledge made in June to allow the European Stability Mechanism (bail-out fund) to stabilise struggling banks in Spain and other European Monetary Union (EMU) states. The US, the IMF has said, must increase its debit ceiling and delay automatic spending cuts and tax increases expected next year – otherwise the economy could fall back into recession and have a knock on effect to the rest of the world.

Jorg Decressin, a senior analyst at the IMF, also told Sky News: "The general mix of policy - which is to reduce large fiscal deficit, and to support growth through an accommodative monetary policy and through financial sector reform - is the right way to go.”


Heidi Vella is a features writer for

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David Cameron’s starter homes: poor policy, but good politics

David Cameron's electoral coalition of buy-to-let retirees and dual-earner couples remains intact: for now.

The only working age demographic to do better under the Coalition was dual-earner couples – without children. They were the main beneficiaries of the threshold raise – which may “take the poorest out of tax” in theory but in practice hands a sizeable tax cut to peope earning above average. They will reap the fruits of the government’s Help to Buy ISAs. And, not having children, they were insulated from cuts to child tax credits, reductions in public services, and the rising cost of childcare. (Childcare costs now mean a couple on average income, working full-time, find that the extra earnings from both remaining in work are wiped out by the costs of care)

And they were a vital part of the Conservatives’ electoral coalition. Voters who lived in new housing estates on the edges of seats like Amber Valley and throughout the Midlands overwhelmingly backed the Conservatives.

That’s the political backdrop to David Cameron’s announcement later today to change planning to unlock new housing units – what the government dubs “Starter Homes”. The government will redefine “affordable housing”  to up to £250,000 outside of London and £450,000 and under within it, while reducing the ability of councils to insist on certain types of buildings. He’ll describe it as part of the drive to make the next ten years “the turnaround decade”: years in which people will feel more in control of their lives, more affluent, and more successful.

The end result: a proliferation of one and two bedroom flats and homes, available to the highly-paid: and to that vital component of Cameron’s coalition: the dual-earner, childless couple, particularly in the Midlands, where the housing market is not yet in a state of crisis. (And it's not bad for that other pillar of the Conservative majority: well-heeled pensioners using buy-to-let as a pension plan.)

The policy may well be junk-rated but the politics has a triple A rating: along with affluent retirees, if the Conservatives can keep those dual-earner couples in the Tory column, they will remain in office for the forseeable future.

Just one problem, really: what happens if they decide they want room for kids? Cameron’s “turnaround decade” might end up in entirely the wrong sort of turnaround for Conservative prospects.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.