Change and no change for UK recovery
In the past three months the Fund's economists think our growth prospects have got notably worse, even though their forecast for the global recovery has been revised up.
Back in April, the Fund was expecting the UK economy to grow by 2.5% in 2011. In today's update that prediction has fallen to 2.1%. The forecast for 2010 has been nudged down as well - from 1.3% to 1.2%. This is at a time when the global growth prediction for 2010 has been revised up by 0.4 percentage points, to 4.6%.
The Fund doesn't spell out why it is now more gloomy about the UK, but I am assured that last months' Budget is the reason. The report does highlight the tightening in fiscal policy which has occurred in the eurozone in recent weeks (see chart below) - which it reckons will cut growth in those economies by about 0.25 percentage points in 2011.
Of course, the main economic "event" since the IMF put it April forecasts together has been the financial market turbulence across the channel.
Interestingly, it does not think that turbulence alone will affect growth: it says "the negative impact of tighter financing conditions will be countered by the positive effects of a weaker Euro."
The negative impact on Europe's prospects for recovery come only through the decision by governments across Europe to tighten fiscal policy more rapidly than planned.
There isn't any suggestion from the Fund that governments have acted unwisely - it says the pace of tightening for 2011 is now "broadly appropriate", and that it was important for countries "facing sovereign funding pressures" to embark on immediate fiscal consolidation. George Osborne would say that means us.
But there are warnings here for both eurozone governments, and our chancellor.
On the eurozone, today's downgrade means that the Fund is looking at just 1.3% growth for those countries in 2011 - much slower than the UK - with faster growth in Germany and France offset by very weak growth for Spain and others.
What is more, the Fund is keen to stress that even this weak recovery "hinges on the use, as needed, of the European Stabilization Mechanism...and, more important, on successful implementation of well-coordinated policies to rebuild confidence in the banking system."
Put it another way - even that rather sombre forecast depends on European governments getting their act together in a way they have generally failed to do in their response to the crisis to date.
The other warning, which applies to the UK but also the advanced countries as a group, is that the "downside risks to global growth have risen sharply" since April, ie - the world has become an even scarier place.
Naturally, the greatest short-term risk is another round of financial market turbulence, driven by concerns about eurozone sovereign risks. In line with the report it gave G20 leaders in Toronto (see my post IMF says G20 could do better), the Fund thinks that another financial market shock could ultimately cut global growth by 1.5% percentage points in 2011.
But as we know, the other big risk hanging over the world economy comes from precisely the opposite direction. This is the risk that, in their rush to reassure markets about government borrowing, governments will push through "an overly severe or poorly planned fiscal consolidation" which ends up stifling domestic demand.
Oh yes, and they also have to worry about how - and how quickly - they are going to reform the financial system, and the potential impact of those reforms on bank lending and economic activity.
All in all, the IMF says that navigating past these risks will provide "daunting policy challenges" to governments in the months ahead. You can say that again.