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The International Monetary Fund (IMF) released new projections, indicating that the UK is on track to be the second-fastest-growing among the most advanced economies globally. Despite this positive outlook, the UK is also expected to experience the highest inflation rate among G7 nations, driven by increasing energy and utility costs. The IMF’s forecasts are part of its biannual outlook for the global economy, highlighting potential challenges and opportunities for different countries.
The IMF’s assessments have shown that the UK is handling economic turbulence better than its counterparts in the G7 group, with projected outperformance expected in 2025. However, the UK’s economic growth rates are forecasted to remain modest, with an expected rate of 1.3% for this year and next. On a per capita basis, economic output is projected to grow at a slower pace, positioning the UK at the bottom of the G7 league table. Chancellor Rachel Reeves emphasized the need to address the feeling of stagnation in the economy, particularly among working people, experts, and stakeholders.
Despite the positive economic growth projections, the IMF warned that the UK still faces higher inflation rates compared to similar countries, with forecasts indicating a rise to 3.4% this year and 2.5% in 2026. The Bank of England governor, Andrew Bailey, expressed confidence in easing inflationary pressures, following recent data showing an increase in unemployment and slower wage growth. Shadow chancellor Sir Mel Stride raised concerns about the impact of inflation on UK households, pointing out the challenges faced by families due to rising costs.
In the global context, the IMF highlighted the implications of US tariffs and their impact on the economy, alongside other factors such as a weakened dollar and uncertain trade policies. The IMF’s chief economist, Pierre-Olivier Gourinchas, acknowledged the negative effects of tariff shocks on global outlook but suggested that mitigating measures had softened the blow. As the IMF underscores potential risks associated with overly optimistic expectations around artificial intelligence (AI), markets are urged to be vigilant about potential corrections in the future
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