The British economy will shrink by 2.8 per cent this year in the worst performance of any developed economy, the International Monetary Fund (IMF) predicted today.

In a profoundly gloomy set of figures, the fund slashed its previous forecasts for world economic growth to near standstill at only 0.5 per cent, the weakest since the Second World War, from a November estimate of 2.2 per cent.

The dire figures came as the United Nations’ International Labour Organisation published a report predicting that the two years of global recession could cost a total of 50 million jobs worldwide and trigger social unrest.

The outlook was also dire for the United States and the eurozone, whose economies were seen contracting by 1.6 per cent and 2 per cent, respectively.

George Osborne, the Shadow Chancellor, said the forecast was a devastating critique of the Government’s handling of the economy.

“Gordon Brown cannot answer the simplest question of all,” he said. “If Britain is well prepared as he claims, why are we facing the worst recession in the world?

“Let us hope these forecasts are wrong. But if they are not, Britain is set to endure the worst downturn of any major country and the worst year for the economy since 1948. Without a change of direction we will be living with Labour's debt crisis for a generation.”

Gordon Brown’s spokesman said that other economies were predicted to face similar difficulties and the Prime Minister was convinced that the Government was taking the right action to get Britain through the global recession.

He said: “The Prime Minister is absolutely confident, as he was setting out today, that the Government’s plan for stability and recovery - which is first recapitalisation of banks, then a fiscal stimulus, then action to get lending moving - is the right approach, the right plan, and it is in line with the approach of every other major economy.”

In its report the IMF said that deflation risks were rising and that toxic assets needed to be removed from the banking system to arrest the vicious spiral.

It called on governments to find new strategies to combat the economic turmoil and counter uncertainty.

“The main risk is that, unless stronger financial strains and uncertainties are forcefully addressed, the pernicious feedback loop between real activity and financial markets will intensify, leading to even more toxic effects on global growth,” the IMF report said.

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