The Washington-based organisation has slashed its expectations for economic growth in the UK and other western countries in a report published this week.
The report, entitled World Economic Outlook, predicts the UK will see growth of 1.6% this year – a figure that undercuts chancellor Alistair Darling’s forecast of between 1.75% and 2.25%.
The report states: “The financial market crisis that erupted in August 2007 has developed into the largest financial shock since the Great Depression, inflicting heavy damage on markets and institutions at the core of the financial system.
“The US is projected to tip into a mild recession in 2008, despite aggressive rate cuts by the Federal Reserve and timely implementation of a fiscal stimulus package.”
The IMF warns it could be the worst performance for the US economy for a decade.