IMF upgrades UK growth forecast while cutting global outlook

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The economic forecast for the UK has been raised from 0.7 per cent to 0.9 per cent by the International Monetary Fund.

In April, the Washington-based think tank cut the UK outlook after suggesting chancellor George Osborne reconsiders the pace of his austerity programme.

The UK’s upgrade comes as the IMF cut the growth predictions for the US, eurozone and emerging markets.

The US is now facing a growth prospect of 1.7 per cent, down from 1.9 per cent, while the eurozone is expected to shrink by 0.6 per cent compared with the 0.4 per cent contraction it forecast in April.

Emerging markets and developing economies have been dealt the worst growth forecast drop in total, dropping 30 basis points to 5 per cent for the rest of the year. Russia’s growth outlook has been slashed from 3.4 per cent to 2.5 per cent.

The IMF says the downgrades were “driven to a large extent by appreciably weaker domestic demand and slower growth in several key emerging market economies as well as more protracted recession in the euro area”. 

“Emerging market economies have generally been hit hardest, as recent increases in advanced economy interest rates and asset price volatility, combined with weaker domestic activity have led to some capital outflows equity price declines, rising local yields, and currency depreciation,” it adds.