BRITAIN was on a collision course with the International Monetary Fund today after the Washington-based financial watchdog slashed its forecasts for economic growth.
The IMF said that the global economy is recovering faster than expected but the UK is still languishing. It now thinks that Britain's GDP will grow at 1.2% this year and 2.1% in 2011, down from the 1.3% and 2.5% earlier forecast.
The 2011 figure is well below the 2.3% predicted by the Office for Budget Responsibility, set up by Chancellor George Osborne to produce independent economic forecasts.
The IMF warning came as the Bank of England held interest rates at the historic low of 0.5% for the 16th month running -- an indication that the Bank's Monetary Policy Committee is still far more concerned about rising unemployment than inflation.
The IMF is raising its forecast for global economic growth this year, from 4% to 4.5%. The world economy performed strongly in the first half of this year, largely thanks to robust growth in Asia.
Concerns over the sustainability of government finances in the developed world, especially Greece and others in Europe, were the major threat to global recovery, the agency argued.
It said governments should focus on improving their finances, but warned them not to make cutbacks too rapidly, which some saw as a swipe at Osborne who is trying to force through the most dramatic cuts in a generation.
The IMF …