The deeply fragile state of the global economy was laid bare ahead of official numbers on Wednesday that are expected to reveal the UK economy shrank by 0.1pc in the final three months of last year.
Evidence that the UK is contracting again would follow Tuesday's watershed moment for the national debt, which has breached £1 trillion for the first time in history.
Growth over the next two years in the world's advanced economies, including the UK, will be "too sluggish to make a major dent in very high unemployment", the IMF warned as it confirmed that it had cut its outlook for Britain in 2012 from 1.6pc to just 0.6pc – lower than the UK's official 0.7pc forecast.
Britain is predicted to bounce back to growth of 2pc in 2013, though, and outpace all its major European rivals, as the euro crisis pitches the single currency area into recession this year, which the region's economy contracting by 0.5pc.
Under a downside scenario that does not even include a euro break-up, the eurozone would plunge by a further 4 percentage points and global growth would tumble from 3.3pc to just 1.3pc.
Olivier Blanchard, the IMF's chief economist, said the world economy is "in danger of stalling".
Figures from the Office for National Statistics today are expected to show that the UK economy has already stalled, contracting 0.1pc in the three months to December and leaving growth for the whole of 2011 at 0.9pc.
Sir Meryvn King, the Bank of England Governor, on Wednesday offered households little hope for the year ahead with a warning that the recovery would be "arduous, long and uneven".
According to the IMF, growth has been weaker than expected because of the "rise in sovereign yields, the effects of bank deleveraging on the real economy, and the impact of additional fiscal consolidation". The IMF again urged countries with "fiscal space" to slow down their consolidation plans, but refrained from identifying which countries it had in mind.
Last September, it suggested the UK should delay austerity if growth were to sink below expectations and gilt yields stay at historic lows. Both have come to pass. The IMF yesterday reiterated that countries "with very low interest rates... should reconsider the pace of near-term fiscal consolidation".
Treasury officials stressed that the IMF was not referring to the UK as the country does not have any "fiscal space" in regard to debt and deficit.
A Treasury spokesman said: "That our national debt has reached more than £1 trillion simply shows the unsustainable level of spending this country built up over the past few years, and shows why it is critical for our nation's future that we deal decisively with the deficit."
Public sector net debt excluding financial interventions rose to £1.004 trillion in December – equivalent to £16,400 per person and 64.2pc of GDP – as the Government borrowed £13.7bn last month. The deficit was better than forecasts of £14.9bn and means the UK has borrowed about £11bn less than at this point last year and is on track to hit its target of £127bn for 2011/2012.
However, economists cautioned that January will be critical as it is when most corporation tax and self-assessed income tax are collected.
The Telegraph
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