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United Kingdom: 2001 Article IV Consultation—Staff Report; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for the United Kingdom
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2001 Article IV consultation with the United Kingdom, the following documents have been released and are included in this package:
the staff report for the 2001 Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on December 10, 2001, with the officials of the United Kingdom on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on February 11, 2002. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
a Public Information Notice (PIN) summarizing the views of the Executive Board as expressed during its March 4, 2002 discussion of the staff report that concluded the Article IV consultation.
a statement by the Executive Director for the United Kingdom.
The document(s) listed below have been or will be separately released.
Selected Issues Paper
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
To assist the IMF in evaluating the publication policy, reader comments are invited and may be sent by e-mail to Publicationpolicy@imf.org
Copies of this report are available to the public from
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International Monetary Fund
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INTERNATIONAL MONETARY FUND
UNITED KINGDOM
Staff Report for the 2001 Article IV Consultation
Prepared by the Staff Representatives for the 2001 Consultation
Approved by Michael Deppler and Leslie Lipschitz
February 11, 2002
The Article IV consultation discussions were held in London during November 28-December 10, 2001. The mission comprised Mr. Cottarelli (Head), Ms. Coorey, Messrs. Escolano, Engels, Tzanninis (all EU1) and Ghosh (PDR). Ms. Schumacher (MAE) joined the mission as part of the preparation for the 2002 Financial Sector Assessment Program. Mr. Scholar, Executive Director for the United Kingdom, and Mr. Kelmanson (OED) participated in the discussions. Staff met with the Chancellor of the Exchequer, the Governor of the Bank of England, the Chairman of the Financial Services Authority, and other senior officials, including members of the Monetary Policy Committee. Staff also met representatives of the Confederation of British Industries, the Trades Union Congress, private think tanks, rating agencies, and banks.
The United Kingdom has accepted the obligations of Article VIII, Sections 2, 3, and 4. The exchange system is free of restrictions on the making of payments and transfers for current international transactions. (Appendix II)
The United Kingdom has subscribed to the Special Data Dissemination Standard (SDDS), and its data provision is adequate for conducting surveillance (Appendix III).
The authorities released the mission’s concluding statement and have agreed to the publication of the staff report.
At the conclusion of the last consultation in February 2001, Executive Directors commended the authorities for the continued strong performance of the economy since the early 1990s. With downside risks to global growth, Directors welcomed the February interest rate cut and encouraged the authorities to stand ready to cut rates further if signs of weaker domestic activity emerged.
Contents
I. Overview and Key Issues
II. Report on the Discussions
A. Why has the U.K. Economy Performed better than other G-7 Economies in 2001?
B. Imbalances and Short-Term Prospects
C. Fiscal Policy
D. Monetary Policy
E. Risks to the Financial Sector
F. Structural Policies for Productivity Growth
G. Other Issues
III. Staff Appraisal
Tables
1. Selected Economic Indicators
2. Main Components of Aggregate Demand
3. Public Sector Budgetary Projections
4. Balance of Payments
5. Medium-Term Scenario
6. Indicators of External and Financial Vulnerability
Figures
1. International Comparison of Trends and Forecasts
2. Consumer Price Inflation
3. Fiscal Indicators
4. Productivity—International Comparison
5. International Comparison of Short-Term Interest Rates
6. Leading Economic Indicators
7. Household Savings and Asset Prices
8. Interest Rates
9. Cyclical Position, Demand, and Output
10. Real Exchange Rate, Current Account, and Trade
11. Manufacturing Production
12. Indicators of the Corporate Sector
13. Debt and Interest Payment Indicators
14. Tax and Expenditure Ratios
15. Labor Market Indicators
Text Boxes
1. The Fiscal Framework
2. The Sterling Real Exchange Rate
3. Eliminating VAT Zero-Rating
Appendices
I. Basic Data
II. Fund Relations
III. Statistical Information
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Public Information Notice (PIN) No. 02/22
FOR IMMEDIATE RELEASE
March 7, 2002
International Monetary Fund
700 19th Street, NW
Washington, D.C. 20431 USA
Telephone 202-623-7100
Fax 202-623-6772
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March 4, 2002
