IMF Upgrades UK Outlook, Predicts Second-Highest G7 Growth in 2025

National Press Corporation Reporter
United Kingdom

The United Kingdom is forecast to be the second-fastest-growing economy among the G7 nations this year, according to the latest projections from the International Monetary Fund (IMF).

The IMF expects the UK economy to expand by 1.3% in both 2025 and 2026, outperforming other major economies apart from the United States. Despite modest figures, this growth projection marks a positive sign for Britain in a year overshadowed by global trade tensions and geopolitical uncertainty.

However, the IMF also warned that UK inflation will remain the highest in the G7 over the next two years, primarily due to rising energy and utility bills. Inflation is projected to average 3.4% this year and 2.5% in 2026, before falling back to the Bank of England’s 2% target by the end of next year.

The G7—comprising the US, UK, France, Germany, Italy, Canada, and Japan—represents the world’s most advanced economies. While the UK is expected to climb to second place this year, Canada is forecast to retake the position in 2026, with growth of 1.5%.

In contrast, Germany, France, and Italy are all predicted to experience slower growth, between 0.2% and 0.9%.Chancellor Rachel Reeves welcomed the IMF’s upgraded forecast, calling it a “promising sign” for Britain’s economic outlook.“This is just the start. For too many people, our economy feels stuck,” she said. “Working people feel it every day, and I am going to deal with it.”

But Shadow Chancellor Sir Mel Stride described the IMF’s inflation warning as “grim reading,” accusing Labour of allowing the cost of living to rise and business confidence to collapse.The IMF attributed the UK’s improved outlook to strong activity in early 2025 and a better trade environment, helped by the recently announced US-UK trade deal.

Global Concerns: Tariffs and AI Risks

Beyond the UK, the IMF warned that the global economy faces growing risks from new US tariffs, rising trade barriers, and uncertainty over the Federal Reserve’s independence.

The Fund cautioned that AI-driven optimism could also face a major correction, comparing a potential “AI bust” to the dot-com crash of 2000–01 if corporate profits fail to meet expectations.Despite these challenges, the IMF said that if managed effectively, faster AI adoption could still boost global productivity and support long-term economic growth.