The UK economy will underperform other bid nations this year and will even be lower than Russia, according to the International Monetary Fund.

Despite an improving outlook for energy prices and inflation, the IMF has downgraded the UK’s annual growth projection.

It now expects the economy to contract by 0.6% in 2023, making the UK the slowest-growing big economy in the world. The Russian economy is expected to grow by 0.3%, despite sanctions imposed after its invasion of Ukraine last February.

The UK is the only big economy expected to contract and is the only economy in the G7 not to have reached its pre-pandemic size. It has suffered the worst inflation rate of its peers in the past year.

However, the IMF conceded that after the Autumn Statement it thinks the UK economy is now “on the right track”.

Chancellor Jeremy Hunt responded by saying: “The Governor of the Bank of England recently said that any UK recession this year is likely to be shallower than previously predicted, however these figures confirm we are not immune to the pressures hitting nearly all advanced economies.

“Short-term challenges should not obscure our long-term prospects – the UK outperformed many forecasts last year, and if we stick to our plan to halve inflation, the UK is still predicted to grow faster than Germany and Japan over the coming years.”

The Treasury said that since 2010, the UK has grown faster than France, Japan and Italy. Since the EU referendum in 2016 it said the UK has grown at about the same rate as Germany.

It adds that cumulative growth over the 2022-24 period is predicted to be higher than Germany and Japan, and at a similar rate to the US.

However, the economy is forecast to enter recession within months, and even on the most benign forecasts is likely to last throughout this year.

The Bank is expected to raise rates again on Thursday but signal that further rises will be less aggressive as inflation comes under control.

China’s emergence from its harsh Covid-19 lockdown, along with falling wholesale energy prices, has allowed the IMF to raise its global growth forecast by 0.2 percentage points to 2.9% this year after an expansion of 3.4% last year.