Gloomy outlook for UK economy with slow recovery expected
The UK's economic recovery remains "slow and fragile" with output expected to stay well below-par for an extended period, the International Monetary Fund has concluded.
Officials from the Washington-based body also said that attempts to boost credit by injecting billions into the economy and maintaining interest rates at a historic low had been only partially successful.
Some forecasters were concerned that the continued slow pace of growth could actually undermine the Government's austerity policies.
The gloomy outlook comes just a week after the IMF had initially delivered a boost to Chancellor George Osborne by increasing its growth forecast by 0.3% to 0.9% for 2013.
In the report, it said the trend of households paying off debts and poor demand from outside the UK meant that the improvement was limited.
"Economic recovery in the UK continues to be slow and fragile, as domestic deleveraging pressures remain and external demand is weak," the report said.
While economic activity was projected to recover, expansion would be weak "relative to the scale of underutilised resources", it added, leading to continued underperformance for some time to come.
"The output gap is projected to remain sizeable for an extended period, portending the risk that continued cyclical weakness will lead to a permanent loss in the economy's productive capacity," the report said.
It forecast inflation, which has crept up to 2.9%, declining in the medium term to its 2% target over the medium term.
The picture of an anaemic recovery was dampened further by a warnings about risks from the eurozone as well as the reduction of debt levels in the public and private sector.