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The savage slump in the world's leading economies is set to be even deeper than previously feared, with recovery unlikely to materialise next year, the International Monetary Fund (IMF) said yesterday. In a grim assessment of global prospects, the IMF again drastically cut its forecasts for key economies across the world. It blamed the continuing blight from severe financial stresses for a worsening global outlook. For Britain, the fund inflicted a double blow to Alistair Darling minutes after the Chancellor unveiled his Budget. It forecast that the UK economy would shrink by 4.1 per cent this year, markedly worse than Mr Darling's new projection of a 3.5 per cent decline, and said the recession would drag on into 2010, with a further drop of 0.4 per cent in GDP next year. The Chancellor has predicted a recovery with growth of 1.25 per cent next year. The fund's report warned that, despite the far-reaching official efforts to bail out banks and stem financial turmoil, governments had failed to halt a downward spiral as intense financial strains and deteriorating economic conditions feed off each other. Calling for still more forceful action by governments on both sides of the Atlantic, the IMF said that halting the slump in the global economy and restoring growth depended critically on official efforts to heal the financial sector. But a day after the fund predicted that cumulative losses from the credit crisis for banks in the US, Europe and Japan would hit $4 trillion, it warned that, even if economic recovery was secured, it would be anaemic and “sluggish relative to past recoveries”. The latest IMF forecasts, in its twice-yearly World Economic Outlook, project what it says will be the worst world recession since the Second World War marked by a worldwide plunge in economic output (GDP) of 1.3 per cent. That compares with its January forecast, which foresaw meagre world growth of 0.5 per cent, still weak enough to be classed as a global recession. In the leading economies of the West, the IMF expects GDP to plummet by 3.8 per cent this year, down from the 2 per cent drop it expected in January. It also expects no revival next year, with the advanced industrial economies set to stagnate with zero growth. That contrasts with the recovery to 1.1 per cent growth that the fund envisaged four months ago. The bleak new assessment cut forecasts for every Western economy this year. The US economy, at the eye of the global financial storm, is forecast to shrink by 2.8 per cent this year and then to stagnate next year. The IMF has abandoned its hopes of a resurgence of American growth to 1.6 per cent next year and cut its US forecast for this year by a further 1.2 percentage points. In the eurozone, the report said that the plight of Europe's big economies would also worsen, with the 16-nation bloc suffering a 4.2 per cent collapse in GDP this year, shrinking by another 0.4 per cent next year. Germany is tipped to be worst hit with a GDP plunge of 5.6 per cent this year and a further 1 per cent next year. Only France is predicted to see some imminent relief from the gloom, with a 3 per cent decline in 2009 forecast to be followed by modest 0.4 per cent growth after the new year. The IMF said there were dangers that even its grim new assessment could be too rosy, if what it repeatedly called the “corrosive” downward spiral of financial and credit stresses aggravating economic woes were not arrested.