The revised projection, announced on Tuesday, October 13, is an improvement on the fund’s previous forecast of 1 per cent in July. Stronger-than-expected economic performance during the first half of the year contributed to the upgrade, with the UK economy growing by 0.6 per cent in the first quarter and 0.5 per cent in the second.
However, the IMF expects growth to slow to 1.2 per cent in 2027 as higher energy costs and long-term interest rates weigh on household spending and business investment.
The fund also expects UK inflation to average 3.3 per cent this year before easing to 2.8 per cent in 2027. Both figures remain above the Bank of England’s 2 per cent inflation target, adding to pressure on policymakers to contain rising prices.
The warning comes ahead of Chancellor John Healey’s first budget, scheduled for October 28. The government faces the challenge of supporting households struggling with living costs while keeping public borrowing under control.
The IMF has urged Britain to maintain its deficit-reduction plans and avoid broad energy subsidies, recommending temporary, targeted assistance for households that need support.
Although the upgraded forecast offers some relief, Britain’s economic outlook remains vulnerable to energy market disruptions, persistent inflation and higher financing costs.
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