Cheap oil prices 'will spur UK economy'
Low oil prices will help sustain steady growth in the UK and other advanced economies but at the same time they face a threat from low inflation and stagnation, the International Monetary Fund (IMF) has said.
In its latest World Economic Outlook, the IMF predicted world growth of 3.5% this year, unchanged from its previous projection in January. Its forecast for UK growth this year remains at 2.7%, though for next year it is cut from 2.4% to 2.3%.
It said: "In the UK, lower oil prices and improved financial market conditions are expected to support continued steady growth."
The IMF said global expansion this year "will be driven by a rebound in advanced economies supported by the decline in oil prices". But global prospects were "uneven" with growth slipping back in emerging economies.
There would be weaker activity for some major oil exporters, with the Russian economy - also hit by tensions over Ukraine - expected to shrink by 3.8% this year, worse than the previously estimated 3%.
The IMF said that while risks to global growth "are now more balanced" than six months ago, they "remain tilted to the downside".
These included the danger of low inflation in countries saddled by high debt, with the warning coming on the same day that official figures showed inflation falling to minus 0.01% in the UK.
IMF chief economist Olivier Blanchard said: "A number of complex forces are shaping the prospects around the world.
"Legacies of both the financial and euro area crises - weak banks and high levels of public, corporate, and household debt - are still weighing on spending and growth in some countries."
The outlook for the US this year has been slashed by 0.5% to 3.1% while for the eurozone it has been upgraded from 1.2% to 1.5%, helped by low oil prices and a weaker single currency amid a €1.1trn (£790bn) stimulus programme. The IMF said conditions were ripe for "robust US economic performance in 2015" but pointed to risks such as the strong dollar hitting exports and the low oil price suppressing investment. "Stagnation and low inflation in advanced economies, notwithstanding the recent upgrade to the near-term growth forecasts for some of these economies, could hamper the recovery," it said.