The International Monetary Fund has announced that it is revising its growth forecast for the UK economy this year. The Washington-based organization, which previously predicted that the UK would have the slowest growth among all G7 nations, now expects it to be in the middle of the pack.
The updated forecast, which raises the projected growth rate from 0.5% to 0.7%, was first reported in May during the IMF’s annual assessment of the UK economy and does not reflect the recent change in government. However, new Chancellor Rachel Reeves has expressed her satisfaction with the improved outlook and has committed to further efforts to boost economic growth.
In a statement, Reeves said, “While it is encouraging that the IMF is anticipating an increase in growth, we must not underestimate the challenges facing our economy and the legacy left by the previous government. That is why we are already taking difficult decisions to strengthen the foundations of our economy, so we can rebuild Britain and improve the lives of all our citizens.”
The IMF’s updated forecast falls short of the promises made by the Labour party to achieve the fastest economic growth among G7 countries during their time in office. According to the IMF, the UK’s projected growth rate of 0.7% this year is significantly lower than the 2.6% expected in the US, and next year’s forecasted growth rate of 1.5% is also smaller than Canada’s projected 2.4%.
In addition to revising its UK growth forecast, the IMF also raised its global growth forecast for 2025 by 0.1 percentage points to 3.3%. However, the organization cautioned that this projection is subject to potential fluctuations depending on political circumstances in the coming years.
The IMF stated, “The potential for major shifts in economic policies due to upcoming elections, which could have negative repercussions on the global economy, has increased uncertainty around our baseline forecast. These potential changes pose risks of fiscal recklessness, which could worsen debt dynamics and have a detrimental effect on long-term yields. Furthermore, a rise in trade tariffs and implementation of protectionist policies around the world could lead to harmful cross-border effects and spark a costly race to the bottom.”
