WASHINGTON (AFP) -- The International Monetary Fund raised its 2007 growth outlook for Britain's economy to 2.9 percent, while warning about risks including a frothy property market.

The new figure, released in the IMF's annual review of the heavyweight European economy, was up from its last forecast of 2.7 percent given in September.

The British economy grew 2.7 percent in 2006, according to official estimates, and the IMF hailed "the economy's continued impressive performance" as well as government efforts to bring down the national debt.

"A number of directors considered, however, that vulnerabilities, including those associated with high housing prices, warrant vigilance," the report from the IMF's executive board stressed.

House prices in Britain have soared by nearly 200 percent over the past decade, prompting warnings that an overheated property market could implode and drag down the wider economy.

The IMF predicted British consumer prices would run at an annual rate of 2.3 percent in 2007, unchanged from last year. It estimated the jobless rate at 5.3 percent in 2007, down from 5.4 percent in 2006.

The Bank of England said last month that it expects British annual inflation to drop below its 2.0 percent target over the next 12 months, assuming that interest rates rise again to reach 5.50 percent.

British 12-month inflation fell sharply to 2.7 percent in January after a record of 3.0 percent in December, according to government data.

The Fund said the British government's decision to welcome immigrants from new European Union member states, in contrast to the closed-door policies of some of its neighbors, has "helped fill skills gaps" and kept the economy open. But it also cautioned: "Openness may also increase exposure to downside global risks."

The Bank of England's monetary policy remains "well-positioned to respond to shocks, though taming the energy-price-related increase in inflation remains a challenge," the IMF directors also said. "They agreed that the (pound's) exchange rate may be slightly overvalued, though well within the bounds of uncertainty associated with such estimates, and in any case by a small enough margin not to be a concern."

The report continued: "Directors welcomed the government's plans for fiscal consolidation. "Given the favorable medium-term outlook and the possibility that financial-sector and housing-related revenues may be temporarily high, directors agreed that building the fiscal cushions needed to respond to adverse shocks should be a priority."