According to new projections from the International Monetary Fund (IMF), the UK is expected to be the second-fastest growing economy among the world’s advanced nations in 2025 and 2026, with a growth rate of 1.3% for both years. This modest growth is notable, as it places the UK ahead of most G7 countries, excluding the United States, amid ongoing trade and geopolitical tensions.
However, the IMF also forecasted that UK inflation could reach the highest level within the G7 by 2025 and 2026, driven primarily by rising energy and utility costs. The current forecast suggests an average inflation rate of 3.4% for 2025, decreasing to 2.5% by 2026, with expectations of it falling to 2% by the end of 2026.
The G7 includes the US, UK, France, Germany, Italy, Canada, and Japan, but does not encompass rapidly growing economies like China and India. Notably, the IMF indicated that the UK’s improved forecast is due to robust economic activity observed in the first half of 2025 and a better trade outlook, partly attributable to a recent US-UK trade agreement.
Chancellor Rachel Reeves expressed support for the upgraded outlook but acknowledged challenges, stating that “for too many people, our economy feels stuck.” Conversely, Shadow Chancellor Sir Mel Stride criticized the rising inflation forecasts, suggesting that UK households are experiencing financial strain.
The IMF’s broader global economic outlook noted potential risks, including the impact of significant US tariffs on imports, increasing costs for American consumers, and growth expectations related to artificial intelligence, which could lead to market corrections. These forecasts were released ahead of annual IMF and World Bank meetings, which attract attention from finance ministers and central bankers worldwide.
Source: https://www.bbc.com/news/articles/cn092p27xn0o?at_medium=RSS&at_campaign=rss