The British economy will contract by -2.8% this year in the worst performance of any developed nation, according to the International Monetary Fund (IMF).

The Washington-based agency also said the current world-wide slump is likely to be the “deepest recession since the Second World War”. In a grim set of figures, the fund sharply reduced its previous forecasts for world economic growth to just 0.5%, the weakest since 1945, down from a November estimate of 2.2%.

The numbers came out only hours after the International Labour Organisation published a report predicting that the two years of global recession could cost a total of 50 million jobs worldwide, and spark social unrest in many parts of the world. The IMF’s outlook was also dire for the United States and the Euro-zone, whose economies were seen contracting by -1.6% and -2% respectively, but the organisation said Britain would be the hardest hit of all the major developed economies.

The IMF revised its forecasts for the contraction in the UK economy down to -2.8% from -1.3%. This is gloomier than Government estimates contained in the pre-Budget report where Chancellor Alistair Darling predicted the economy would shrink from -0.75% to -1.25%. The fund said that deflation risks were rising and that distressed assets needed to be removed from the banking system to halt the vicious spiral downwards. It called on governments to find new strategies to combat economic turmoil and counter uncertainty.

Official figures recently confirmed that Britain fell into recession at the end of 2008. The UK economy contracted by -1.5% in the final three months of the year - worse than expected by City analysts and ramping up fears of a deep and prolonged recession.