Britain should be “ready to redeploy” some form of furlough aid if it faces a virulent COVID-19 wave requiring widespread lockdowns, the International Monetary Fund (IMF) has said.<\/p>\n
The IMF said fresh waves of the pandemic and the uncertainty they bring represented the “major risk” to the economic outlook.<\/p>\n
It pointed to a “mild slowdown” in growth in the new year as latest restrictions designed to tackle the spread of the Omicron variant bite.<\/p>\n
The IMF said Omicron risked creating further supply chain problems and inflationary pressures – but that “if it or a future outbreak is more virulent this could weigh on confidence and demand”.<\/p>\n
It added: “In the event of a virulent COVID-19 wave requiring widespread mandated closures, the authorities should be ready to redeploy a subset of the most successful previous exceptional programmes.”<\/p>\n
The IMF cited “a furlough scheme and targeted support to the most vulnerable households and small businesses” as examples of such programmes.<\/p>\n
Its comments were published as part of the global organisation’s regular health-check of the UK economy.<\/p>\n
IMF managing director Kristalina Georgieva told a virtual news conference: “We do not expect the need to return either to the full lockdowns we have seen or the policy support of the kind that this type of lockdown requires.<\/p>\n
“Should there be a need of more restrictive measures especially affecting contact-intensive services, then the policy support will have to be calibrated accordingly.<\/p>\n
“What we know is that there has been quite a lot of experience in supporting vulnerable people and businesses. It can be applied then in somewhat different conditions appropriately.”<\/p>\n
Ms Georgieva said the UK certainly had the “fiscal space” to afford such support if needed.<\/p>\n
“I have no doubt that if that becomes a necessity there would be appropriate action,” she added.<\/p>\n
The IMF’s report hailed the rapid vaccination campaign allowing the economy to reopen during the summer, saying: “The recovery has been faster than expected amid strong continued policy support.”<\/p>\n
But it also noted supply constraints, price pressures and new COVID-19 variants posing risks to the recovery, while acknowledging the Bank of England’s tricky task of keeping a lid on inflation while ensuring that interest rate hikes do not pour cold water on the recovery.<\/p>\n