IMF chief signals upgrade for UK as global economy picks up speed

Christine Lagarde has signalled that the International Monetary Fund will upgrade its UK growth forecasts next month, as she said the global economy was gathering momentum.

Ms Lagarde, the fund’s managing director, said the world appeared to be at a turning point, with solid output seen across the world at the end of last year.

She said she was especially encouraged by stronger-than-expected economic activity in countries such as the UK and Japan, as well as the eurozone.

Ms Lagarde said indicators of future growth in sectors such as manufacturing and broader confidence barometers were all picking up, while expectations of more expansionary fiscal policy in the US were also contributing to the improved outlook.

Speaking before this week’s G20 meeting of finance ministers and central bank governors in Germany, Ms Lagarde said: “Policymakers will likely share a sense of growing optimism, because the recent strengthening of activity suggests that the world economy may finally snap out of its multi-year convalescence.”

The IMF upgraded its forecast for UK growth this year to 1.5pc in January, as it rowed back further from predictions of a house price crash and market chaos.

Last October its prediction was 1.1pc growth.

Ms Lagarde’s comments in a blog post suggest the IMF's forecasts could be upgraded again in April when it releases its latest world economic outlook.

The UK economy expanded by 0.7pc in the final quarter of last year, which was much stronger than most analysts expected.

The IMF is also likely to upgrade its forecasts for global growth from current projections of 3.4pc in 2017 and 3.6pc in 2018.

It issued a routine “surveillance note” before the meeting where it urged countries to join forces to preserve the benefits of trade and avoid protectionism.

“Above all, we should collectively avoid self-inflicted injuries,” said Ms Lagarde, who warned that it would be “a mistake to assume that [the global economy] will automatically return to rude health”.

She wrote: “This requires steering clear of policies that would seriously undermine trade, migration, capital flows, and the sharing of technologies across borders. Such measures would hurt the productivity, incomes, and living standards of all citizens.”

Steven Mnuchin, the new US Treasury Secretary, will make his G20 debut at the meeting in Baden-Baden. He is expected to push hard for US interests at the meeting, including a reaffirmation of  past commitments to avoid competitive currency devaluations.