IMF hopeful for a 2010 recovery

The International Monetary Fund (IMF) has issued an upbeat forecast for the British economy today with the prediction that it will return to growth next year.

The IMF is predicting that the UK’s worst slump since the Second World War will be over by the end of the year and is predicting growth of 0.2%, compared with the 0.4% fall it had predicted in April.

Last week, official figures revealed that the UK economy shrank by 2.4% in the first three months of 2009 - far worse than expected and the biggest quarterly decline in 51 years.

Meanwhile, global economic growth is expected to recover to 2.5% next year - higher than the IMF’s earlier prediction of 1.9% growth, also forecast in April.

However, the world economy is still expected to shrink by 1.4% this year, said the organisation.

In its report, the IMF said: “The global economy is beginning to pull out of a recession unprecedented in the post-World War II era, but stabilisation is uneven and the recovery is expected to be sluggish.”

The report added that “risks to the global financial system have moderated from the extreme levels identified in April”, however, it highlighted that “vulnerabilities remain“.

Earlier this week, influential think tank, the National Institute of Economic and Social Research (NIESR), forecasted that gross domestic product (GDP) in the UK fell 0.4% in the three months to June - the fifth consecutive quarter of decline.

Official GDP figures for the April to June period are due to be released at the end of this month.

At the end of last month, the NIESR said the UK economy grew in May by 0.1% and follows a similar rise in the previous month and was the first growth in a year. However, weak industrial output data forced the NIESR to revise its GDP figures.

The British Chambers of Commerce, the leading business group, voiced its concern earlier this week about a recovery in the UK.

While the group believes that the worst of the UK’s recession is over, it said talk of a recovery is “premature”.

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