International Monetary Fund sounds upbeat note on UK economic growth

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The UK is set to be the world’s fastest-growing major advanced economy this year according to a sharply-upgraded forecast from the International Monetary Fund.

Gross domestic product (GDP) is expected to increase by 2.9 per cent, up from an earlier 2.4 per cent prediction by the global body.

It puts Britain ahead of the US on 2.8 per cent, Germany on 1.7 per cent and Canada at 2.3 per cent. The figures also upgrade UK growth for next year though they predict it will be slower than 2014.

The latest World Economic Outlook also gives its backing to policies pursued by Chancellor George Osborne and Bank of England governor Mark Carney but it sounds a warning over the risk posed by surging house prices and the threat of deflation in the eurozone.

The IMF predicts world growth will accelerate to 3.6 per cent this year and 3.9 per cent in 2015 though it warns that the global recovery is still “fragile”.

But chief economist Olivier Blanchard said: “Put simply, the recovery is strengthening. The various brakes that hampered growth are being slowly loosened.”

Tax and spending tightening was slowing and investors are becoming less worried about debt and banks are strengthening.

Mr Blanchard said while the global economy was “far short of a full recovery”, normal monetary policy – meaning a withdrawal from stimulus measures such as ultra-low interest rates and money printing – was now on the agenda.