UK growth forecast upgraded by IMF
The International Monetary Fund (IMF) upgraded its growth forecast for the UK today but warned that the eurozone - the country's biggest trading partner - will still slide into recession.
Britain is expected to grow at 0.8% this year, up from its previous forecast of 0.6%, but the IMF said recent improvements were "fragile" as "spillovers" from the euro area crisis hit the rest of the continent.
The IMF said eurozone output will decline 0.3% as the sovereign debt crisis, a general loss of confidence and tough austerity measures across the region have an impact.
The report comes amid resurgent fears over the health of the single currency bloc, with Spain in focus as the country's borrowing costs soar against a backdrop of high unemployment and swelling private debt.
While the IMF upgraded its global growth forecast from 3.25% to 3.5%, it warned the recovery would be "weak" and urged policymakers to continue implementing "fundamental changes" needed to achieve healthier growth.
The UK will outperform Germany and France in 2012, which are expected to grow by 0.6% and 0.5% respectively, while Italy and Spain will drag the eurozone into recession with declines of 1.9% and 1.8% respectively.
Greece remains the biggest drag on the troubled region, with a 4.7% decline forecast for 2012, although this would be an improvement on the 6.9% drop in 2011.
The slight improvement to the global forecasts was aided by monetary policy across Europe, the IMF said, including the European Central Bank's decision to pump billions of euros into the economy through a cheap loan scheme for the banks.
The IMF report comes a week before UK gross domestic product (GDP) figures are published for the first quarter of 2012 - revealing whether or not the country entered a technical recession, following a 0.3% decline in the final three months of 2011.
In a boost to Chancellor George Osborne, the IMF said "strong" fiscal tightening in advanced economies had made good progress.
A Downing Street spokeswoman said: "The IMF report does show that their growth forecasts are in line with the Office for Budget Responsibility."
Asked about the IMF's comments on the eurozone, the spokeswoman said: "The eurozone still needs to get its house in order.
"Those issues still exist and no doubt will be a focus of discussions at the coming meeting of the IMF towards the end of the week, which the Chancellor will be attending."
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