Alf Young on Thursday: The International Monetary Fund�s latest take on the UK economy foresees growth of just 1.4% this year, falling to 1.1% in 2009. That�s not just down on the 1.75% the IMF had pencilled in for both years three months ago.

THE International Monetary Fund's latest take on the UK economy foresees growth of just 1.4% this year, falling to 1.1% in 2009. That's not just down on the 1.75% the IMF had pencilled in for both years three months ago. Growth of 1.1% in 2009, if realised, would be the UK's worst performance for 17 years.

This IMF forecast is also well adrift of the last UK pointers from the other principal international forecaster, the Organisation for Economic Co-operation and Development. As recently as June, the OECD was projecting UK growth of 1.8% this year, slowing to1.4% in 2009.

Neither body is yet projecting outright recession. But it would not be hard to accommodate two consecutive quarters of falling output (the official definition of recession) at some point within such an increasingly downbeat scenario.

The fund's executive board expects UK inflation to exceed the Bank of England's 2% target "for an extended period". It could even hit 5% by the end of this year. And it predicts Gordon Brown's second golden rule - that public net debt should not exceed 40% of GDP - "is likely to be breached".

The IMF executive board is urging the UK Government to stick with that rule and fulfil its budget promise to tighten fiscal policy over these years of diminishing growth. It urges the Bank of England, about to reveal its latest rates decision, to resist any temptation to ease monetary policy at the moment. If the debt rule is breached, the board says, "concrete and frontloaded plans" should be introduced to bring debt back below its ceiling.

Such advice looks more than a little at odds with all the nods and winks emerging from Downing Street that Chancellor Alistair Darling is putting together an economic recovery plan to ease consumer pain in the energy market and kick-start a faltering housing sector.

We already know about the September tax allowance hike to undo some of the damage from the scrapping of the 10p rate and the decision to postpone the next round of duty increases on petrol and diesel. But whether it's the reintroduction of income support for mortgage payments, the suspension of stamp duty on some or all house purchases, or a new fund to help first-time buyers, it seems clear more giveaways are on the way to try and counter the Brown government's current unpopularity.

All these measures will come with a price tag. And higher government spending, against a backdrop of shrinking tax revenues, suggests more borrowing, more pressure on that 40% debt rule and a loosening, not a further tightening, of fiscal policy.

The IMF's advice looks likely to be ignored. After all, it doesn't have to fight elections. Politicians do.

Whatever finally emerges, the main aim of any economic recovery plan is never in doubt. Most politicians - not just the beleaguered residents of the Brown bunker - want to see growth restored to more feel-good levels. That's what the Bush administration in the United States has been up to, with its aggressive tax cutting and bail-outs for assorted financial institutions, aided and abetted by the Federal Reserve's deep interest rate cuts.

But in the context of a near-global downturn, such strategies carry with them significant risks. One year on from the start of the current crisis, the IMF's former chief economist, Kenneth Rogoff, has just written a challenging critique of such remedies.

Rogoff, now holding a chair of economics at Harvard, argued in the FT last week that, in a global downturn like this one, the world economy cannot simply grow its way back into robust health.

He sees the main challenges in the current crisis as excess demand for commodities, triggered by explosive growth in the emerging super-power economies, and an excess supply of financial services.

Unless the world grows more slowly for the next couple of years, the inflationary pressures on commodities from oil to metals and food will simply continue to mount.

Throwing government subsidies at that slowdown, in a bid to reverse it, risks letting inflation rip and paying a steep price to re-anchor price expectations at some later date.

There are signs that the current slowdown is already weakening commodity price pressures. The barrel oil price is falling. The price of some metals is coming down sharply too. Economic recovery plans, however well-intentioned, risks reinflating those bubbles.

On financial services Rogoff is even more hardline. The sector has to shrink, he argues, if stability is to be restored.

So why are politicians so keen to mount rescue missions for every lame-duck bank that emerges?

"If financial firms are not allowed to go out of business, how exactly do central banks and regulators intend to effect the shrinkage of the financial industry commensurate with the sharp fall in key lines of business related to mortgage securitisation and derivatives?" he wonders.

Other industries, such as the airline business, have gone through such painful rationalisations at various times in their history. Why should banks be any different?