George Osborne
Latest IMF World Outlook Report is good news for the UK chancellor (Reuters)

Chancellor George Osborne has been given a boost after the International Monetary Fund said the UK is the fastest growing economy in Europe.

The UK economy will grow 1.4% in 2013 and 1.9% the following year, according to the IMF forecasts in its World Outlook Report.

It comes off the back of other developed nations having their growth forecasts slashed by the Washington-based lender.

Shadow chancellor Ed Balls tried to downplay the IMF report.

"After three wasted years of flat lining it's good that we finally have some growth. But this is the slowest recovery for 100 years and working people are worse off as prices continue rising faster than wages," Balls said.

He attacked Osborne's austerity policies and said there was no strategy to create growth and jobs.

"The government should bring forward infrastructure investment now, which could be used to build thousands of affordable homes," he said.

"Instead of more complacency from George Osborne we need action to secure a strong and sustained recovery, catch up all the lost ground and tackle the cost of living crisis."

IMF and Austerity

Interestingly, Jörg Decressin, the deputy director of the IMF's research department, made comments about austerity in the eurozone that were relevant to the UK.

"Only if growth were to disappoint in a major way, would one have to go and revisit this," he said about the austerity targets.

"But the pace as a whole strikes us now for this year and next year as appropriate," he added about the pace of spending cuts in the eurozone.

This could be seen favourably by Osborne as supportive of his economic strategy.

For several years he has said that the UK must make serious cuts in public spending and "pay its way in the world".

The Caveat

As ever with any IMF report there was a catch about the effectiveness of austerity as a tool to fight recessions and its impact on economic growth.

"In an environment of still low interest rates and underutilization of resources, public investment can also be brought forward to offset the drag from planned near-term fiscal tightening, while staying within the medium-term fiscal framework," the report said in what could be interpreted as an argument against austerity.