The International Monetary Fund lifted its forecast for GDP growth this year from 0.7% to 0.9%, while its outlook for 2014 was held at 1.5%, the Daily Telegraph reports.

But the institution warns of sharp cuts to world, US, eurozone and emerging market predictions as it warned that ‘downside risks to global prospects still dominate’.

The forecasts for Britain now stand head and shoulders above its major European peers, with Germany the closest at 0.3% growth this year and 1.3% next. The eurozone as a whole is expected to shrink 0.6% in 2013, compared with a forecast decline of 0.3% in April.

Underlining the improving UK outlook, the respected National Institute of Economic and Social Research (NIESR) estimated that the economy grew 0.6% in the three months to June – even after weak manufacturing figures for May published yesterday.

The IMF appeared to target the UK at its Spring economic outlook, when chief economist Olivier Blanchard warned George Osborne that he was ‘playing with fire’ and should ‘consider adjustment to the original fiscal plans’.

The following month, the fund urged the government to abandon austerity for a year and borrow as much as £10bn extra for infrastructure spending. The Chancellor rejected the recommendation,and the economic data has picked up markedly.

Growth in the first quarter beat forecasts at 0.3% and, according to NIESR, is on course to top expectations again. The think-tank’s prediction was made despite a surprise 0.8% dip in manufacturing output in May, according to the Office for National Statistics.