UK's Economic Performance 'very strong', but risks remain- IMF

Underlying economic vulnerabilities have been addressed, and steady growth looks set to continue, it said.

But high household debt, a "strikingly large" trade deficit and high government debt are still risks to the economy.

IMF

It also warned about uncertainty over whether the UK would stay in the EU.

"Trade would be harder, tariffs would be higher, [and] the financial fluidity within the European Union would not be as good as it is at the moment, [should the UK leave the EU]," the IMF's Christine Lagarde told BBC business editor Kamal Ahmed.

She said the IMF was in favour of opening up trade, removing barriers, and the mobility of goods, capital and people.

"[The EU] has proven effective over the years," she said.

'Strong' economy

She gave an upbeat assessment of the UK economy, saying that the UK was in a strong position at the moment.

"Life is about risk, but what we are seeing is a very strong performance from the British economy," she said.

Growth has outstripped other major economies, the unemployment rate has fallen, employment is at a high, the fiscal deficit has been reduced, and financial sector resilience has increased, the IMF said in a report.

Steady growth looks likely to continue over the next few years, and inflation should gradually return to its 2% target, the IMF said.

But although UK house price growth has eased, the household debt-to-income ratio is still high, and could leave some households vulnerable to shock interest rate rises.

The large trade deficit could affect cash flows into the UK, adversely affecting growth, the report says.

In addition, high government debt, and a continuing deficit, could tie the government's hands in dealing with any future recession.