IMF lowers forecast for UK economy

Its forecast was reduced from 0.8 per cent just three months ago, reflecting the UK’s slide into a double-dip recession in the first quarter of the year and the gloomier outlook for the world economy.

The IMF also lowered its expectations for the UK’s growth next year to 1.4 per cent, from 2 per cent previously.

The growth forecast for the UK was cut by more than for any other developing country.

It warned that policymakers need to take further action to get to grips with the eurozone crisis and to help arrest the slowdown in emerging markets such as China, India and Brazil, where growth has slowed from “overly optimistic” projections.

It said: “Clearly, downside risks continue to loom large, importantly reflecting risks of delayed or insufficient policy action.”

The IMF stuck with its previous forecast for the eurozone to contract by 0.3 per cent this year and called for more progress on creating a banking and fiscal union.

Advanced economies saw their forecasts for 2013 lowered to 1.9 per cent, from 2.1 per cent previously.