IMF cuts UK and world economic growth forecast

The International Monetary Fund (IMF) has trimmed its forecast for UK and global economic growth this year and next year.

Britain will only expand by 1 per cent in 2012-13, according to the respected body, 0.1 per cent less than previously predicted.

The forecast for next year has been downgraded from 2.2 per cent to 1.9 per cent since October.

The figures emerged ahead of the publication of official GDP estimates for the final quarter of last year, which many fear will show UK plc contracting.

The IMF's World Economic Outlook update predicted that the global economy would grow 0.1 per cent less than anticipated in each year, by 3.5 per cent and 4.1 per cent respectively.

Much of the reduction stemmed from a weaker outlook for the eurozone.

"Policy actions have lowered acute crisis risks in the euro area and the United States. But in the euro area, the return to recovery after a protracted contraction is delayed," the IMF said.

Shadow chief secretary to the Treasury Rachel Reeves said: "Following this week's rising borrowing figures, these downgraded growth forecasts for Britain are yet more evidence that the Government's economic policies are failing. Growth forecasts have been downgraded again this year and by more than any advanced economy other than Japan next year.

"The IMF said over a year ago that a plan B would be needed in Britain if growth was to turn out lower than expected.

"Since then we've had a double-dip recession, yet more growth downgrades and borrowing rising as a result, so there can be no question that a change of course is desperately needed.

"But, instead of taking action to kick-start our economy, David Cameron has spent the last few months obsessing about Europe."

PA