LONDON, July 27 (Reuters) - The International Monetary Fund has sharply revised up its growth forecast for Britain's economy this year after giving a more downbeat assessment in April when the country was only just beginning to relax COVID-19 restrictions.

British economic output slumped by almost 10% in 2020, its biggest drop in more than 300 years, as it suffered one of the world's highest official death tolls for COVID-19 and endured months of curbs on business and social activity.

But on Tuesday the IMF forecast Britain's economy would grow by 7.0% this year, the same as the United States and the joint-fastest growth rate among major advanced economies.

This was 1.7 percentage points higher than the IMF forecast in April, the biggest upgrade for a major economy.

Britain's growth forecast for 2022 was revised down by 0.3 percentage points to 4.8%.

The IMF's forecasts for 2021 and 2022 are now closer to those made by the Bank of England in May.

IMF chief economist Gita Gopinath said the upgrade mostly reflected faster growth between February and April, when Britain's economy adapted better to lockdown restrictions than the IMF had assumed.

Britain's economy would still be around 3% smaller in 2025 than the IMF had forecast before the pandemic, when it also expected closer post-Brexit trade ties with the European Union than those now in place, she told reporters.

"It's a combination of factors, including weaker investment. There are Brexit-related processes there too," she said.

The new projections come as part of the IMF's quarterly update on the world economy, which pointed to a rift between rich nations that had been able to roll out COVID-19 vaccines and poorer countries which had not.

Britain has fully vaccinated more than 70% of adults, and there now appears to be a slowing in a recent surge of the Delta variant which had delayed the lifting of most remaining social-distancing rules in England until July 19.

"There are positive signs that our economy is rebounding faster than initially expected," British finance minister Rishi Sunak said after the IMF's new forecasts.

"That said, we still face challenges ahead as a result of the impact of the pandemic."

The IMF also praised Britain and Canada for setting out plans to rein in COVID-related fiscal support over the medium term, but continuing with spending for now.

Britain is due to end its main furlough wage subsidy program at the end of September and stop a temporary 20-pound ($28) weekly supplement to its main welfare benefit for unemployed and low-paid workers. ($1 = 0.7251 pounds) (Reporting by David Milliken Editing by William Schomberg and Giles Elgood)