Just what is a UK government supposed to do to keep the IMF happy? This morning it has issued a bulletin predicting that the UK will be the only major economy to shrink in 2023 – by 0.6 per cent – and blaming it on ‘tighter fiscal and monetary policies’. This represents an even-bleaker outlook than the IMF foresaw in October, when it pencilled in a 0.2 per cent contraction over the course of 2023.

Yet this is the same IMF which last September condemned Kwasi Kwarteng’s mini-Budget for slashing taxes, saying ‘given elevated inflation pressure in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture, as it is important that fiscal policy does not work at cross purposes to monetary policy’.

To judge by past experience, no-one should take IMF forecasts too seriously

So are we supposed to have tax cuts or tax rises, spending cuts or spending rises? It is little use looking to the IMF for guidance. This was, after all, the same organisation which, a week before the 2016 EU referendum, warned that Britain faced a two year recession with the economy falling by 1.9 per cent (if it opted for a Norway-style deal and remained in the single market) and 5.5 per cent (if it relied on trade under WTO rules). House prices, it warned, would fall sharply. In the event, the economy continued growing until felled by Covid in 2020, and house prices continued to grow until last year.

It is possible, reading between the lines, to devise a course of action for the UK economy which could, just perhaps, please the IMF. It was particularly critical of untargeted help with energy bills, as manifested in Liz Truss’s Energy Price Guarantee, which was predicted could cost up to £120 billion when it was announced last September. Perhaps if that scheme had been limited to the less well-off – as indeed it should have been – and Kwarteng had instigated only modest tax cuts targeted at industry, the IMF’s tongue would not have lashed the UK.

Yet with wholesale gas prices on the slide, it looks as if the Energy Price Guarantee may become an irrelevance by the summer: bills will be lower than the level guaranteed by the government, costing them nothing. Moreover, the UK economy defied predictions of a fall in November, with the result that it looks very unlikely that the UK economy will have fallen into recession in the fourth quarter of 2022. So why is the IMF’s outlook for Britain becoming more negative?

The danger is that the IMF’s grim forecasts for Britain become, to some extent at least, a self-fulfilling prophecy: that international investors are encouraged to think of Britain as a basket case, refuse to put their money here and thereby detract from economic growth. To judge by past experience, no-one should take IMF forecasts too seriously (or anyone else’s economic forecasts, for that matter). But you never know who is putting their faith in them.