The International Monetary Fund (IMF) has raised its growth forecast for the UK economy from 0.7 per cent to 0.9 per cent in 2013.
The Fund also lowered its 2013 forecast for the global economic growth to 3.1 per cent due to a slowdown in the economies of emerging countries and European markets. Further, global economic growth rate for next year was reduced to 3.8 per cent.
Olivier Blanchard, chief economist at the IMF, was quoted by Reuters as saying: “After years of strong growth, the BRICS are beginning to run into speed bumps. And while growth in emerging countries has slowed, inflation has not fallen with it, suggesting the economies are already growing close to their potential.”
The Fund warned that the US government's monetary stimulus policy may stop the flow of funds to developing nations, and termed slowdown in the Chinese economy as a threat for global economic growth.
IMF said it had underestimated the recession levels in Europe, and had not considered the US to proceed with cuts in spending.
“Risks of a longer growth slowdown in emerging market economies have now increased due to protracted effects of domestic capacity constraints, slowing credit growth, and weak external conditions,” the Fund said.
The Fund cut down its 2013 growth forecast for emerging markets to 5 per cent and said that the eurozone will continue to be in recession this year, with activity contracting by over 0.5 per cent.