IMF gives Osborne boost with growth forecast

Its latest prediction, a sharp upgrade from a previous figure of 1.9 per cent, would see Britain among the fastest-growing of the world’s advanced economies.

The World Economic Outlook puts the UK’s pace of expansion ahead of European rivals including Germany and France, although behind the US on 2.8 per cent.

It forecasts that growth for 2013 will have come in at 1.7 per cent and that after recording 2.4 per cent this year, it will slow to 2.2 per cent in 2015.

The figures are in line with the latest forecasts from Britain’s independent Office for Budget for Responsibility (OBR), published at the time of Mr Osborne’s Autumn Statement last month.

The IMF report said: “Activity in the United Kingdom has been buoyed by easier credit conditions and increased confidence.”

But the report said “economic slack” – spare capacity left in the economy which can be measured by factors such as unemployment – would remain high.

The report’s reference to credit comes after households’ access to finance was boosted by initiatives such as the Funding for Lending scheme and Help to Buy. But conditions for small business borrowing, seen as key to economic health, have not kept pace.

Britain’s recovery so far has been fuelled by consumer spending and experts say a rise in real-term wages – which remain subdued –together with an improvement in exports and business investment is needed to sustain an upturn.

The IMF forecasts that the world economy will grow by 3.7 per cent in 2014, up from 3.6 per cent in its last forecast, though risks remain.

Advanced economies remained well off their peak, the fund said, advising that policies such as low interest rates and quantitative easing through pouring money into the economy – as in the UK and the US – should continue amid ongoing spending cuts.

“Given the risks, the monetary policy stance should stay accommodative while fiscal consolidation continues,” the report said.