The UK is forecast ....14 Oct 2025 14:44
....to be the second-fastest growing of the world's most advanced economies this year and next, according to new projections from the International Monetary Fund (IMF).
The rates of growth remain modest at 1.3% for both years, but that outperforms the other G7 economies apart from the US, in a torrid year of trade and geopolitical tensions.
However, UK inflation is set to rise to the highest in the G7 in 2025 and 2026, the IMF predicts, driven by larger energy and utility bills.
UK inflation is forecast to average 3.4% this year and 2.5% in 2026 but the IMF says this will be "temporary", and fall to 2% by the end of next year.
The G7 are seven advanced economies - the US, UK, France, Germany, Italy, Canada and Japan - but the group doesn't include fast-growing economies such as China and India.
The IMF is an international organisation with 190 member countries. They work together to try to stabilise the global economy.
In the IMF's forecast for economic growth, external, the UK overtook Canada, after its trade-war-affected economy was hit by the biggest downgrades for 2025 and 2026. Germany, France and Italy are all forecast to grow far more slowly at rates of between 0.2 and 0.9% in 2025 and 2026.
Chancellor Rachel Reeves welcomed the fresh upgrade to the IMF's outlook for the UK's economy.
"But know this is just the start. For too many people, our economy feels stuck," she said.
"Working people feel it every day, experts talk about it, and I am going to deal with it."
But highlighting the inflation forecasts, shadow chancellor Sir Mel Stride said the IMF assessment on made for "grim reading".
He said that UK households "were being squeezed from all sides", adding: "Since taking office, Labour have allowed the cost of living to rise, debt to balloon and business confidence to collapse to record lows."
The IMF said a slight overall upgrade for the UK in its World Economic Outlook, from its previous outlook in April, was due to "strong activity in the first half of 2025" and an improved trade outlook, partly thanks to the recently announced US-UK trade deal.
Trump tariffs loom large
The global outlook is dominated by the so far "muted response" of the world economy to the imposition of hefty tariffs on almost all imports into the US, a weakened dollar, questions about the independence of the US Federal Reserve and sky high valuations of US tech companies.
The IMF expect some of this to unwind soon, saying "resilience is giving way to warning signs". In the US tariff costs which had been absorbed by exporters and retailers, are now feeding into higher goods prices.
So far tariffs have been reflected in higher prices for American shoppers of household appliances, but not for food and clothing.
The IMF cited Brexit as an example of how uncertainty around major changes in trading arrangements can, after a delay, lead to steady falls in investment.
read more;
https://www.bbc.co.uk/news/articles/cn092p2
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