THE Coalition has rebuffed a call from the International Monetary Fund (IMF) to ease its austerity plans as the economic watchdog cut its forecast for UK growth.
The IMF said the private sector was being hampered by economic uncertainty and a lack of credit.
It cut this year's growth forecast from 1% to 0.7% and 2014's projection from 1.9% to 1.5% and said recovery was progressing slowly.
The IMF suggested George Osborne should consider changing his plans in the light of lacklustre private demand.
Last night, Shadow Chancellor Ed Balls said the watchdog was right to "step up its warnings and insist a change of economic policy is considered right".
Stewart Hosie for the SNP said: "The Chancellor's remaining credibility has gone with the loss of the triple A credit rating, a timid and unimaginative Budget and a failed economic policy that has produced nothing but austerity and misery."
No 10 said the Chancellor would not change tack.
The IMF's World Economic Outlook also suggested further action on monetary policy, potentially including the purchase of private sector assets.
The report said: "The recovery is progressing slowly, notably in the context of weak external demand and ongoing fiscal consolidation."
It noted rebalancing from the public to private sector was "being held back by deleveraging, tight credit conditions and economic uncertainty". Hopes for an export-led recovery were also being hit as "declining productivity growth and high unit labour costs are holding back much needed external rebalancing".
It added: "Greater near-term flexibility in the path of fiscal adjustment should be considered in the light of lacklustre private demand."
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