The International Monetary Fund (IMF) this morning slashed Britain’s growth forecast to -0.4 per cent for 2012, as it said the global economic recovery is weakening.
The IMF said the economy would expand at a modest rate of 1.1 per cent next year, from its previous forecast of 1.4 per cent. It downgraded global growth next year to 3.6 per cent from the 3.9 per cent it forecast earlier this summer.
Meanwhile, the IMF warned that the UK should defer spending cuts until next year if growth is weaker than forecast.
It said a first line of defence against weaker growth would be for the Bank of England to loosen monetary policy and for the government to allow total unemployment benefit payments to rise if joblessness increased.
But if that failed to spur growth, Chancellor George Osborne should postpone some of the cuts planned under his flagship austerity programme to future years, it added.
The comments come as Osborne rejected any change to fiscal policy in his speech yesterday at the Conservative Party’s annual conference.
City A.M. Reporter