LONDON (AFP) – The International Monetary Fund has said that the nation's economy "is on the mend" but it cut its 2011 growth forecast for the country to 2.0 percent from its previous estimate of 2.1 percent.
"Our central scenario envisages real GDP growth of two percent in 2011, rising gradually to 2.5 percent in the medium term," the IMF said in an update on Monday.
In July, the IMF forecast gross domestic product growth of 2.1 percent for 2011.
"The UK economy is on the mend. Economic recovery is underway, unemployment has stabilized and financial sector health has improved," it said in its latest report on Britain.
"The government's strong and credible multi-year fiscal deficit reduction plan is essential to ensure debt sustainability. The plan greatly reduces the risk of a costly loss of confidence in public finances and supports a balanced recovery.
"Fiscal tightening will dampen short-term growth but not stop it as other sectors of the economy emerge as drivers of recovery, supported by continued monetary stimulus."
The coalition government has embarked on slashing a record deficit in a bid to cement the country's recovery from recession.
Recent data showed government borrowing worsened unexpectedly in August to hit a record high for the month as the Conservative-Liberal Democrat alliance prepares a draconian crackdown on public spending.
"With record-high budget deficits, credible fiscal tightening is essential to preserve confidence in debt sustainability and regain fiscal space to cope with future shocks," said the IMF.
"The consolidation plan and implementation of early measures to tackle the deficit -- one of the highest in the world in 2010 -- greatly reduces the risk of a costly loss of confidence in fiscal sustainability and will help rebalance the economy.
"These benefits outweigh the expected costs in terms of adverse effects on near-term growth."
The coalition, led by Prime Minister David Cameron's Conservatives, inherited a record 154.7-billion-pound deficit from the previous Labour administration which it ousted at a general election in May.
In June, Chancellor of the Exchequer George Osborne delivered a deficit-slashing emergency budget amid intense concern about sky-high debt levels in Europe.
SINGAPORE – Oil prices slid to near $76 a barrel Tuesday in Asia as traders awaited the latest U.S. supply figures for clues about the strength of demand for crude.
Benchmark crude for November delivery was down 31 cents to $76.21 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract added 3 cents to settle at $76.52 on Monday.
Crude inventories likely rose 2.2 million barrels last week, according to analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos. The American Petroleum Institute plans to announce its inventory numbers later Tuesday while the Energy Department's Energy Information Administration reports its weekly supply data Wednesday.
Oil prices have snaked around the $75 a barrel level for most of the last year as U.S. crude demand remains sluggish amid an uneven economic recovery. Brimming crude storage levels are also weighing on prices.
"The existing fundamentals could kick prices down to half or less of what they are right now," Cameron Hanover said in a report. "Many traders opt to keep their powder dry until more definitive signals are presented" about the economic outlook, it said.
Investors will be closely watching this week the latest U.S. indicators, including gross domestic product, car sales and industrial production.
In other Nymex trading in October contracts, heating oil fell 0.57 cent to $2.117 a gallon and gasoline dropped 0.28 cent to $1.946 a gallon. Natural gas was steady at 3.793 per 1,000 cubic feet.
In London, Brent crude fell 41 cents to $78.16 a barrel on the ICE Futures exchange.
SINGAPORE (Reuters) – Stocks edged lower throughout Asia on Tuesday following the lead of U.S. markets while the dollar found support on suggestions Japan's central bank might act to ease monetary policy and push down the yen.
Currency markets also remained anxious about the prospects for new Japanese intervention and gold held near record highs.
U.S. and European stock markets dipped as investors grew nervous after four weeks of gains and increasingly wary of European debt challenges, particularly those facing Ireland and Portugal.
The Wall Street Journal reported that Federal Reserve officials were considering a more open-ended smaller-scale bond buying program than was the case in 2009. Traders said that prompted a dip in U.S. treasuries and could offer the dollar some support.
Japan's Nikkei average (.N225) fell 0.6 percent, dropping as the deadline passed for investors to receive dividends on Tokyo stocks for the financial half year.
The yen hovered for a time near its highest level since Tokyo's heavy intervention two weeks ago to sell the currency and depress it.
But sources said the Bank of Japan was considering whether to ease monetary policy further though it could delay action pending a consensus on how to keep economic recovery on track.
Talk of easing was having an effect as was the constant possibility of intervention.
"The market consensus is now that there won't be endless yen strengthening, that if the dollar falls below 84 yen authorities are likely to intervene," said Kenichi Hirano, operating officer at Tachibana Securities.
Korean stocks (.KS11) dipped 0.31 percent, while Australian stocks (.AXJO) were virtually unchanged.
Despite this month's gains, Tokyo stocks rose only some 1.6 percent this quarter, lagging other major stock markets. The S&P 500 has gained more than 10 percent this quarter, while South Korean shares have risen some 9.3 percent.
DOLLAR CLIMBS BACK
The dollar was trading at 84.20 yen at 0230 GMT, little changed from the New York close but up from levels around 84.11 -- its weakest point since the intervention.
The dollar index (.DXY) hit a seven-month trough of 79.19 on Monday, but climbed back in early Asia trade.
The Australian dollar was near two-year highs at $0.9601, while the euro stood at $1.3448, away from Monday's peak of $1.3507 following Moody's decision to cut its ratings on some lower-grade debt of Ireland's Anglo Irish Bank.
The downgrade rattled markets, further jolted by the main opposition party's pledge to seek an early election. The rising cost of rescuing the bank, nationalized during the banking crisis in 2009, has heaped pressure on Ireland's already strained state finances.
Gold slipped after hitting a lifetime high at $1,300 an ounce in the previous session as a rebound in the dollar prompted speculators to lock in gains. U.S. gold futures for December delivery dropped $4.1 an ounce to $1,294.5 an ounce.
Although lower prices could stir up purchases from jewellers, gold's failure to stay above Monday's peak could spur more selling from investors.
South Korean bonds reflected the upward trend and were poised for a third straight day of rises linked to doubts over worries on Irish debt.
Investors on Monday snapped up U.S. Treasury debt, driven by their desire for safer investments and healthy demand at an auction of new two-year government debt in the afternoon.
On Wall Street, the major U.S. stock indexes declined in spite of a flurry of corporate mergers and acquisitions.
Crude fell toward $76 ahead of U.S. reports expected to show fuel stockpiles rose in the world's top oil-consuming nation last week.
(Editing by Tomasz Janowski)