IMF cuts UK GDP forecast
THE International Monetary Fund (IMF) has slashed growth expectations for the UK in its first economic outlook since May’s general election.
UK GDP will expand by 1.2 per cent this year, the IMF said, 0.1 of a percentage point slower than its forecast in April. Growth for next year was marked down 0.4 of a percentage point to 2.1 per cent.
The UK and France were the only Eurozone nations to have their prospects downgraded in 2010. America, in contrast, was upgraded to 3.3 per cent GDP growth this year on the back of increasing private sector demand in the first half. Asian economies are expected to power ahead, fuelled by strong exports and burgeoning domestic consumption.
In its world economic outlook published this morning, the IMF said developed economies should not inject further fiscal stimulus and should begin cutting spending in earnest next year.
It added: “Downside risks have risen sharply. In the near term, the main risk is an escalation of financial stress and contagion, prompted by rising concern over sovereign risk. This could lead to additional increases in funding costs and weaker bank balance sheets and hence to tighter lending conditions.”