IMF chief issues austerity warning

Olivier Blanchard said the Budget in March would be a good time for Chancellor George Osborne to “take stock” of his plan A.

The comments, in a BBC interview, came after the IMF trimmed its forecasts for the UK and global growth.

The UK economy is now expected to expand by 1 per cent rather than 1.1 per cent this year, and 1.9 per cent rather than 2.2 per cent in 2014.

Fears have emerged that official GDP figures for the final quarter of last year, due to be published today, could show a contraction, adding to pressure on Mr Osborne to ease his approach.

Mr Blanchard said it was clear the world was “not out of the woods yet”, adding: “We’ve never been passionate about austerity.

“From the beginning we have always emphasised that fiscal consolidation should be slow and steady,” he said.

“We said that if things look bad at the beginning of 2013 – which they do – then there should be a reassessment of fiscal policy.”