The International Monetary Fund was today set to slash its growth forecasts for the UK economy as Britain reels from the crisis gripping the financial markets.

In its World Economic Outlook published today, the IMF predicts the British economy will plunge into recession and shrink by 0.1% next year. It was the steepest reduction in growth forecasts for any advanced economy. The IMF had pencilled in growth of 1.6% just six months ago.

“The global economy is entering a major downturn,” it said. “Many advanced economies are now close to recession, while emerging economies are also slowing rapidly.”

Growth is slowing from China to Switzerland as policymakers struggle to contain the crisis.
The IMF today forecast the US to grow by 0.1% next year, against its earlier prediction of 0.6%. It said the global economy will expand 3% next year. The April forecast was 3.7%.

IMF first deputy managing director John Lipsky said: “All the advanced economies are stagnant or in mild recession now.”

He added that the slowdown was removing “inflationary dangers”, making it possible for central banks to cut interest rates.

The Bank of England monetary policy committee began its latest two-day meeting today under pressure to slash rates.