Fears of a double-dip recession have been fuelled after the International Monetary Fund slashed the UK's growth forecast and warned the global economy is in a "dangerous new phase".
The UK will see gross domestic product grow 1.1% in 2011, compared with the IMF's latest World Economic Outlook report in April of 1.7%, and by 1.6% in 2012, compared with 2.3%.
The forecasts for the UK in 2011 fall behind projections for Germany, France, the eurozone, US and Canada.
The IMF said the US economy could be weak for years to come and warned that policymakers in the country must balance support for the economy with fiscal tightening.
The organisation, now led by former French finance minister Christine Lagarde, also said the forecasts were dependent on the eurozone debt crisis being contained.
The downgrade is the latest blow to the UK's recovery prospects after the influential think-tank OECD cut its estimate for growth amid a raft of a disappointing economic data.
The Treasury said the Government remains committed to its tough programme of spending cuts and tax reform while the unions and opposition called on Chancellor George Osborne to rethink his plans.
The gloomy outlook is unlikely to deter Mr Osborne from his deficit-busting fiscal measures as the IMF has previously given full backing to his austerity measures.
A report that ministers were contemplating channelling £5 billion extra towards infrastructure projects such as roads, railways and superfast broadband networks was denied by the Treasury.
The BBC said that the Government believed the boost could be implemented within its current strategy as fiscal targets were based around current not capital spending. A Treasury spokesman said: "The Government has set out its spending plans."
Courtesy of London Evening Standard http://www.thisislondon.co.uk/standard/
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