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Lagarde Says IMF ‘Got It Wrong’ on Rallying U.K. Economy

By Simon Kennedy
June 08, 2014 7:00 PM EDT 237 Comments
Christine Lagarde, managing director of International Monetary Fund.
Photographer: Andrew Harrer/Bloomberg
Christine Lagarde, managing director of International Monetary Fund.

The International Monetary Fund underestimated the strength of the U.K. economy when warning against the government’s austerity program, Managing Director Christine Lagarde said.

“We got it wrong,” Lagarde told the “Andrew Marr Show” on BBC Television yesterday. “We acknowledged it. Clearly the confidence building that has resulted from the economic policies adopted by the government has surprised many of us.”

A year after the IMF’s chief economist, Oliver Blanchard, said U.K. budget cutting risked “playing with fire,” the Washington-based lender said in April the U.K. economy will grow 2.9 percent this year, the fastest pace among the Group of Seven nations.

Pressed by Marr on whether she had apologized to Chancellor of the Exchequer George Osborne, Lagarde stopped short of saying so and said “Do I have to go on my knees?”

“We said very clearly that we had underestimated growth for the U.K. and that our forecasts had been proven wrong by the reality of economic developments,” she said.

Lagarde said the U.K. economic outlook was now “more sustainable” as investment joins consumption as an engine. She reiterated the strength of the U.K. housing market remains a threat although she said its rise was “multi-faceted” rather than an outright boom.

Distancing herself from a European Commission call for higher taxes in the U.K., Lagarde said the IMF doesn’t “see a massive increase in tax as recommendable.”

Lagarde, a former finance minister of France, again sought to play down the chance she will become president of the commission without ruling out the chance completely.

“I have a job,” she said. “I’m not a candidate to any other position.”

To contact the reporter on this story: Simon Kennedy in London at skennedy4@bloomberg.net

To contact the editors responsible for this story: Craig Stirling at cstirling1@bloomberg.net Eddie Buckle, Andrew Atkinson

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