British slump will be worst in developed world, says IMF
Britain will be hit harder than any other advanced nation in the worst recession for more than 60 years, world economists warned last night.
In the bleakest assessment yet of British prospects, the International Monetary Fund (IMF) forecast that the economy would shrink by 2.8 per cent this year, twice as much as it previously thought and far more than the 2 per cent average drop for developed nations in 2009.
The stark figures are a severe blow to Gordon Brown, who has continually insisted that Britain is better placed than most countries to weather the downturn. The IMF outlook suggests that the recession in Britain will be deeper than that in the United States, Italy, France and elsewhere.
Alistair Darling, the Chancellor, predicted in November that growth in Britain would rebound to at least 1.5 per cent in 2010, the likely election year, but the IMF points to a far more meagre recovery of only 0.2 per cent.
It expects world growth to rise at no more than 0.5 per cent this year as the “scale and scope of the current financial crisis have taken the global economy into uncharted waters”. This would mean the weakest annual growth since the Second World War.
In another downbeat view, the Institute for Fiscal Studies said that Britain would be saddled with government debt for more than 20 years. Regardless of which party wins the next election, tax increases and spending cuts totalling £20 billion are inevitable by the end of the next Parliament.
The International Labour Organisation predicts that 50 million jobs will be lost around the world this year, taking unemployment to 7.1 per cent, compared with 6 per cent last year.
A recovery will not be possible until the financial sector begins to function again, the IMF said. “Despite wideranging policy actions, financial strains remain acute, pulling down the real economy.” It now predicts that the US will suffer a 1.6 per cent contraction this year, while Germany and Japan will see output fall by 2.5 per cent and 2.6 per cent. But it forecast a gradual recovery for world output in 2010, with growth rising to 3 per cent.
George Osborne, the Shadow Chancellor, said: “This is the day when the British people were confronted with the true cost of Gordon Brown’s failures. It may be a bad day for him, but it’s an even worse day for the country.”
Vince Cable, the Liberal Democrat spokesman, said: “This exposes Gordon Brown’s lie that Britain is well placed to deal with the recession.”
Mr Brown’s spokesman said that the Prime Minister remained “absolutely confident” that the Government was taking the right action to get Britain through the global recession.