The International Monetary Fund has downgraded its projection for UK economic growth to just 0.2% this year.
Publishing its quarterly World economic outlook, the fund slashed its projection for the economy by 0.6 percentage points compared to April’s estimate.It has also downgraded its 2013 growth estimate by the same amount, so that it now stands at 1.4%. This is compared to 0.7% growth in gross domestic product recorded in 2011.
The fund said that in the past three months, the global recovery had ‘shown signs of further weakness’.
‘Sovereign stress’ in the euro area had increased to ‘close to end-2011 levels’, and output in a number of major emerging market economies had also been lower than forecast.
Overall global growth is now expected to be 3.5% in 2012 (down 0.1 percentage points from April’s projection) and 3.9% in 2013 (down 0.2 percentage points).
However, the report states: ‘These forecasts… are predicated on two important assumptions: that there will be sufficient policy action to allow financial conditions in the euro area periphery to ease gradually and that recent policy easing in emerging market economies will gain traction. Clearly, downside risks continue to loom large, importantly reflecting risks of delayed or insufficient policy action.
‘In Europe, the measures announced at the European Union leaders’ summit in June are steps in the right direction. The very recent, renewed deterioration of sovereign debt markets underscores that timely implementation of these measures, together with further progress on banking and fiscal union, must be a priority.’
The 2012 outlook for the combined economies of the eurozone is unchanged from three months ago, with an expected contraction of 0.3%. Growth in 2013 is set to be 0.7%, down from 0.9% predicted in April.
