IMF cuts UK growth forecast to 1.1%
The International Monetary Fund (IMF) has slashed its growth forecast for the UK and warned the global economy is in a 'dangerous new phase'.
It said the UK will will now see gross domestic product (GDP) growth of only 1.1% in 2011, compared with the IMF's last World Economic Outlook report in April which estimated growth at 1.7%. In 2012, it expects growth of just 1.6%, sharply down on the 2.3% previously predicted.
The forecasts for the UK in 2011 fall behind projections for Germany, France, the US and Canada.
The IMF now led by former French finance minister Christine Lagarde, warned that the forecasts were dependent on the eurozone debt crisis being contained and US policymakers balancing support for the economy with fiscal tightening.
The downgrade is the latest blow to the UK's prospects after the influential think-tank OECD cut its estimate for growth amid a raft of poor economic data.
However, the gloomy outlook is unlikely to deter Chancellor George Osborne from his tough programme of spending cuts and tax reforms as the IMF has previously given full backing to his austerity measures.
Ms Lagarde earlier this month said the UK's stance remained "appropriate" but "the heightened risk" meant a need for a "heightened readiness to respond".
The Chancellor's deficit reduction plans have been challenged by business leaders, economists and opposition politicians in recent months as the economic outlook for the UK deteriorates.
But Mr Osborne is determined to continue with his austerity measures.
TUC general secretary Brendan Barber said the growth downgrade was "a further blow to the government's economic credibility". He added: "Calls for a plan B are growing. The Chancellor must change course before he causes even more damage to the economy."
The IMF said UK growth in 2012 should surpass both Germany and France. A Treasury spokesman said: "It is welcome the IMF has forecast the UK will grow more than Germany, France and the eurozone next year".