The austerity policy of UK Chancellor George Osborne has suffered a major blow after the IMF slashed its growth forecasts for the UK economy.
Already stagnating, the international monetary fund has reversed its original forecast of 0.2% growth for this year and instead predicted the UK economy will shrink by 0.4%.
The downgrading of its UK growth expectations is the biggest for any in the developed world, including Spain, Italy and other troubled Euro economies. The UK and the Euro area are the only major economies to have negative growth for this year
The IMF also predicts a sluggish recovery for the UK in 2013, forecasting a 1.1% rise in the UK economy which is down from the original figure of 1.4%.
The downgrading of the UK economy follows Chancellor George Osborne’s pledge to continue with his stringent austerity measures.
The fund has also cut its forecasts for global growth, down to 3.3% from 3.5%.