IMF revises its UK economic growth forecast

The credit crunch, falling house prices and rising unemployment has led to the International Monetary Fund (IMF) revising its forecast for UK economic growth over the next two years.

The IMF said UK growth will be just 1.4% in 2008 and 1.1% in 2009, down from the 1.8% for 2008 and 1.7% for 2009 that it previously forecasted.

The figures are in stark contrast to that of the Chancellor, Alistair Darling, who predicted growth of between 2.25% and 2.75% for next year.

If the predictions from the IMF are accurate, it would leave Britain with its worst performance since the end of the last recession in the early 1990s.

Inflation is currently at the 3.8% mark, which is nearly double expectations which, according to the IMF, means the Bank of England has little room to cut rates tomorrow.

The general consensus among economists is that the bank will leave interest rates unchanged at 5%.

However, the IMF did say it expects inflation to be back on track during 2010, which is in line with the Monetary Policy Committee’s aim to hit the target over a two-year time horizon.

Back in April, the IMF warned that house prices were overvalued by 30% and fears that Britain is one of the most vulnerable countries in the world to a devastating price collapse.

Discuss this in the Finance Markets forums

Story link: IMF revises its UK economic growth forecast