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Britain's economic recovery strong but open to shocks: IMF

Britain's economic recovery is robust and becoming more balanced, but action must be taken to deal with a housing shortage that is causing prices to spiral, the International Monetary fund said on Friday.

LONDON: Britain's economic recovery is robust and becoming more balanced, but action must be taken to deal with a housing shortage that is causing prices to spiral, the International Monetary fund said on Friday.

The IMF report into the country's economic health warned that the recovery could be derailed by external shocks, such as slowing growth in emerging markets, and advised that the Bank of England keep monetary policy loose for the immediate future.

"The economy has rebounded strongly and growth is becoming more balanced," it said.

"Although household expenditures played the driving role in the early stages of the recovery, business investment has picked up more recently."

Britain's economy grew by 0.8 percent in the first quarter of 2014 compared with output in the final three months of last year, recent data showed. On an annual comparison growth was 3.1 percent.

The IMF said the rebound was "expected to persist" with real GDP growth remaining strong in 2014 before returning to trend rates, but that this outlook could be compromised unless productivity improves.

Despite ever-increasing house prices, the group found "few of the typical signs of a credit-led bubble", instead blaming the conditions on a failure to build enough new homes.

External threats to the economy include shocks to growth in emerging markets and the euro area, increased geopolitical tensions and the tapering of unorthodox liquidity measures in the United States.

However, money supply in Britain should "stay accommodative-for now" but policy should be tightened quickly "if costs run ahead of productivity growth".

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