The International Monetary Fund has significantly lowered its UK growth forecast for 2012 to 0.2% and warned the risks from the eurozone debt crisis "continue to loom large".
The global organisation's forecast was yesterday reduced from 0.8% just three months ago, reflecting the UK's slide into a double-dip recession in the first quarter of the year and the gloomier outlook for the world economy.
It also lowered its expectations for the UK's growth next year to 1.4%, from 2% previously. It warned that policymakers need to take further action to get to grips with the eurozone crisis and to help arrest the slowdown in emerging markets.
It said: "Clearly, downside risks continue to loom large, importantly reflecting risks of delayed or insufficient policy action."
The IMF stuck with its previous forecast for the eurozone to contract by 0.3% this year despite policy-makers having taken "steps in the right direction".
It called on politicians to build on recent moves to agree to lend money to Spain's banks by making more progress on creating a banking and fiscal union.
TUC general secretary Brendan Barber described the IMF's verdict as "a damning indictment of the Government's economic strategy".
A Treasury spokesman said the eurozone crisis was dragging on the UK economy but said a new "funding for lending" scheme would encourage banks to lend to small businesses.
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