IMF cuts UK growth forecast for 2012

The International Monetary Fund (IMF) has cut forecasts for UK economic growth this year, warning GDP will grow by just 0.6% in 2012.

In its latest World Economic Outlook, the organisation moved to lower its forecast from the 1.6% growth it had pencilled in just three months ago for the UK, as the crisis in Europe continues to impact investor sentiment.

The IMF also warns there will be a "mild recession" in Europe, with growth shrinking by 0.5% before recovering in 2013.

It adds it expects to see "global activity decelerating but not collapsing". 

Growth estimates have been cut for the main eurozone countries, including Germany which is forecast to grow 0.3% in 2012, down from the 1.3% originally predicted in September.

The eurozone countries worst affected by the crisis face recessions, with the IMF predicting a fall in Italian GDP of -2.2pct, as well a 1.7% decline in Spain.

However, most major economies should avoid sinking into recession as long as European policymakers intensify their efforts to address the eurozone crisis, the IMF says.

Overall, global growth was revised down to 3.3% in 2012, from a September forecast of 4%. The IMF expects to see 3.9% growth in 2013.

Given the depth of the 2009 recession, the IMF warned the latest growth rates are "too sluggish to make a major dent in very high unemployment."

there was some relief for consumers however, with global consumer inflation  projected to ease as demand softens. The IMF said price pressures should remain subdued in advanced economies because of well-anchored inflation expectations.