The International Monetary Fund (IMF) released their new economic forecasts right before the annual meetings. These gatherings attract a diverse and energetic group of finance ministers and central bankers from every corner of the globe to our nation’s capital—Washington, D.C. The group raised its forecast for the UK’s economic growth. It has further upped its forecast for the UK to be the second-fastest-growing economy in the G7, behind only the US of A.
According to the IMF’s projections, UK inflation is projected to average 3.4 percent in 2023 and fall to 2.5 percent by 2026. Meanwhile, don’t expect the IMF to admit that UK inflation is anything other than transitory. They are now forecasting that to drop to 2% by the end of next year. Despite the long odds, the organization continues to look ahead. It also cautions that the UK’s inflation rate will be the highest of all G7 countries in 2025 and 2026 due to climbing energy and utility bills.
The UK’s growth rate is unchanged at 1.3% for each year. This places their performance ahead of all other G7 economies, apart from the US. The IMF’s assessment should send shockwaves across the world about the state of the global economy. In particular, they note the risk that the US AI tech boom could go bust, triggering a much-needed adjustment of excessively rosy growth prospects.
“Excessively optimistic growth expectations about AI could be revised in light of incoming data from early adopters and could trigger a market correction,” – IMF
The IMF specifically criticized the burdensome tariffs imposed in excess of all but a few imports coming into the US. These tariffs would add another layer of turbulence to already-perilous global economic waters. In addition, the institution voiced concerns about funding for the world’s poorest countries, noting that many nations, including the UK and US, are reducing aid budgets in favor of increased defense spending.
Chancellor Rachel Reeves acknowledged the IMF’s upgraded outlook for the UK’s economy, stating, “Know this is just the start. For too many people, our economy feels stuck.” This feeling provides further evidence that, even with rosy growth forecasts ahead, many residents are still experiencing obstacles in their everyday lives.
Indeed, not every response to the IMF’s forecasts was congratulatory. Shadow Chancellor, Sir Mel Stride condemned the assessment. He termed it “grim reading” and noted how it exposes deeper systemic problems not reflected in topline growth numbers.