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BBC News business reporter Emma Haslett reported that the International Monetary Fund (IMF) has raised its forecast for UK economic growth in 2025 to 1.2%, with expectations for a further increase to 1.4% in 2026. This positive outlook follows a promising start to the year, indicating that an economic recovery is currently in progress. The IMF’s prediction comes shortly after a recent adjustment that downgraded growth expectations for the UK from 1.6% to 1.1% in 2025.
Luc Eyraud, the IMF’s UK mission chief, commended the UK for the robust economic growth experienced in the first quarter of the year. However, challenges lie ahead due to global uncertainties, volatile financial markets, and the necessity of controlling day-to-day expenditures. The IMF emphasized the importance of the government’s infrastructure investment plans and planning reforms for stimulating growth if effectively implemented. The Chancellor Rachel Reeves will face tough decisions in balancing taxation and spending for long-term economic stability.
The IMF highlighted that next year’s growth prospects will be affected by global trade tensions, with a projected 0.3% reduction in growth by 2026 due to factors such as US tariffs and ongoing uncertainty in international trade relations. Despite these challenges, the UK has secured trade agreements with key partners like the EU, India, and the US to support UK exporters in a more predictable trade environment. While Chancellor Reeves praised the government’s trade deals for safeguarding jobs and enhancing investment, the shadow chancellor Mel Stride expressed concerns over potential credibility risks with market confidence.
Inflation concerns also play a significant role in shaping economic expectations, with the IMF anticipating a slowdown in UK inflation to 2.2% by 2026, aligning with the Bank of England’s 2% target. Recent data from the Office for National Statistics revealed an unexpected rise in inflation, reaching 3.5% in April. The IMF projected this inflation surge to persist until later in 2026 before returning to target levels. Despite these challenges, Chancellor Reeves remains committed to maintaining economic stability and fostering growth through prudent fiscal management
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