UK has fastest-growing economy, International Monetary Fund says

Britain's economy is growing faster than those of every other major developed country, the International Monetary Fund has disclosed.

In a vindication of George Osborne’s economic plan, the IMF upgraded its forecast for UK growth to 3.2 per cent this year and 2.7 per cent in 2015.

The upward revision of 0.4 percentage points in 2014 and 0.2 percentage points in 2015 from the last forecast in April was the largest upgrade of any major western economy for both years. Britain is expected to grow faster than countries including America, Germany, France and Canada.

^{George Osborne, the Chancellor has said that the IMF has upgraded their 2014 forecast for the UK}

Only last year the IMF warned Mr Osborne that he was “playing with fire” because of his programme of spending cuts and called on him to adopt a “Plan B” to stimulate growth.

Separate figures due to be released are expected to confirm that the economy is finally larger than it was before the recession.

However, the IMF warned in its quarterly World Economic Outlook that the crisis in Ukraine and continued unrest in the Middle East risked creating an oil price spike that could destabilise the global economy. The IMF drastically reduced Russia’s growth forecasts as international investors flee ahead of possible trade sanctions following the annexation of Crimea and the MH17 disaster.

The Prime Minister said that the IMF’s upgrade was a sign of “more jobs and more security for families”.

Danny Alexander, the Liberal Democrat Chief Secretary to the Treasury, said it confirmed that Britain was “in the fast lane of recovery”.

Mr Osborne added: “The IMF has upgraded their 2014 forecast for the UK by more than any other major economy. The Government’s long-term economic plan is working. But the job is not yet done and so we will go on making the assessment of what needs to be done to secure a brighter economic future.”

John Hawksworth, the chief economist at PwC, called the IMF upgrade a “symbolic moment” but warned that the recovery was not yet sustainable.

“In the short term the economy has got a lot of momentum, but beyond 2015 there are still some question marks as to how strong growth will be,” he said.

He warned of a looming “bottleneck” in the economy when consumers can no longer rely on their savings for spending and said a slowdown in consumption could put the brakes on the recovery.

The IMF described the Britain’s rapid growth as an “upside surprise”.

Globally, growth for 2014 was downgraded by 0.3 per cent to 3.4 per cent, reflecting weakness in America and less optimistic forecasts for Brazil, Mexico and South Africa. The IMF said the eurozone area will grow weakly by 1.1 per cent this year and 1.5 per cent next year.

The emerging economies of China and India will grow by 7.4 per cent and 5.4 per cent respectively this year, the IMF said.

Official estimates are expected to show that GDP expanded 0.8 per cent in the second quarter of 2014 to climb above its pre-crisis peak for the first time.

However, Ed Balls, the shadow chancellor, said: “Not only is it two years later than the Chancellor’s original plan said, and three years after the US reached the same point, it’s also the case that GDP per head won’t recover to where it was for around another three years – in other words, a lost decade for living standards.”