AS per OECD's latest Economic Survey, Britain must continue to pursue pro-growth and inequality-reducing structural reforms in order to recover from the nation’s deepest recession in nearly a century.

The effects of the global financial crisis, turbulence from the euro area, and weak domestic demand risk prolonging the downturn. This could reduce the country’s long-term growth potential and add to social pressures.

Presenting the Survey in London, OECD Secretary-General Angel Gurría said, however, that he is confident the UK economy has the capacity to recover over time, providing the right growth- enhancing policies are pursued.

The report argues that monetary policy is a key tool to stimulate the economy in the short term, while the government’s fiscal plan, hard won credibility on the financial markets, and strong institutions allow it the flexibility to adapt to weaker than expected growth. It is appropriate to allow the deficit to shrink more slowly than initially planned to cushion the shock and help households through any downturn. Additional tax increases or spending cuts - beyond those already planned - should not be imposed to compensate for a temporary slowdown, the Survey says.

But medium-term fiscal consolidation continues to be essential, it adds. The government’s plan has achieved a significant reduction of the public deficit, despite difficult economic conditions, but it is still over 8% of GDP (excluding one-offs), while the government debt–to-GDP ratio is above 80%.