David Cameron: Rebalancing UK economy 'slow and difficult'

The UK is going through a "slow and difficult healing process" as it rebalances its economy, Prime Minister David Cameron has said.

His comments came as the International Monetary Fund said it now expected the UK economy to shrink by 0.4% this year.

Mr Cameron said the government was doing "everything it can" to encourage growth in difficult economic times.

He said they had cut the budget deficit by a quarter in two years and there were "positive signs" for the future.

According to the IMF the prospects for the global economic recovery have weakened as government policies across the world have failed to restore confidence.

The fund has downgraded its overall estimate for global growth, with one of the biggest individual country downgrades applied to the UK.

'Progress'

The IMF now expects the British economy to shrink by 0.4% this year, compared with its forecast of 0.2% growth in July.

David Cameron, who is in Birmingham for his party's annual conference, defended his government's economic strategy and said there were "positive signs" the UK economy was changing.

Speaking on BBC Radio 4's Today Programme, he said: "What is happening in Britain is a rebalancing of our economy.

"We need more private sector growth, we need a smaller public sector, we need to make more, sell more overseas and manufacture more.

"It's a slow and difficult healing process, but it is taking place."

On government prospects for cutting the budget deficit, Mr Cameron said the government was "on the right track".

"People are very understanding of the difficult inheritance we had - a record budget deficit, the biggest of anywhere in the developed world," he said.

"The deficit is down by one quarter in two years. It was 11% of GDP when we came to power- it's now 8%. That is progress."

He refused to comment on suggestions that figures expected in the chancellor's autumn statement in December will show the deficit has increased this year.

"We don't have those figures yet. We have to wait until the end of the year to see what the deficit is.

"It's wrong to take one month's figures or make a judgement half-way through the year."

In response to the IMF downgrade, the Treasury highlighted the fact that the IMF had "repeated its advice that the first line of defence against [slowing growth] should be to allow the automatic stabilisers to operate, monetary policy easing and measures to ease the flow of credit - all of which the UK is doing".