Alistair Darling’s Budget forecast that the economy will revive next year and return to modest growth came under heavy fire today as the International Monetary Fund warned that Britain’s slump will drag on into 2010.

The IMF dealt a severe double blow to the Chancellor’s new forecasts barely an hour after they were unveiled.

It said that the recession this year will be even deeper than Mr Darling’s grim new prediction, and that his hope for a recovery next year is set to be dashed.

The Chancellor was forced to admit in the Budget that the UK economy is now set to shrink this year by 3.5 per cent, in its sharpest plunge since the Second World War, conceding that his November forecast for a decline of only about 1 per cent was wildly optimistic.

But the IMF, in its latest World Economic Outlook, said today that it expected an even more brutal slump by 4.1 per cent over 2009, marking a drastic downgrade from its January projection for GDP to drop by 2.8 per cent.

In a further embarrassing blow to Mr Darling, the authoritative report also challenges his high-stakes bet that growth will rebound by the end of the year, in time for the next election.

The Chancellor’s Budget figures envisage a return to surprisingly robust growth of 1.25 per cent in 2010. But the IMF said that it expected the recession to persist, with the economy shrinking in 2010 by another 0.4 per cent.

In January the IMF had predicted that Britain would eke out out meagre growth of 0.2 per cent next year in a feeble recovery but it now believes that even this is too much to expect.

The challenge to Mr Darling's forecasts from the IMF came only a day after the Washington-based global watchdog backed away from estimates of the likely eventual cost of Britain's banking bailouts.

In a separate report on Tuesday, the fund had raised its estimate of the eventual bill for British taxpayers for rescuing UK banks from £130 billion to about £200 billion.

Both figures compared with a £60 billion tipped to be outlined by the Chancellor in the Budget.

But in a highly unusual move that sparked suspicions it had been put under pressure by the Treasury or Downing Street, late last night the IMF abruptly said that the £200 billion figure reflected "old data" that it had mistakenly published and suddenly reverted to its previous £130 billion total.

The flip-flop was presented by the IMF in Washington as a correction of an accidental error. But it came after a day of briefing at Westminster by senior Treasury officials that the IMF figures were wrong.

Government sources deny that pressure was put on the IMF to back down.

It will be scant consolation for Mr Darling that the main driving forces behind the headlong plunge in Britain’s economy that the IMF predicts through this year and into next are global factors, and are also tipped to batter all of the UK’s leading competitors.

In a bleak assessment today, the Washington-based fund made steep cuts to its forecasts for this year and next for every leading Western economy.

Even on the IMF’s dire new projections, Britain is far from the worst-performing of the big industrial economies, with the fund predicting that Germany will now endure a 5.6 per cent slump this year, with the GDP across the eurozone as a whole plummeting by 4.2 per cent.

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