The IMF increased its forecast for UK GDP growth this year to 1.3%, up 0.3 percentage points from its previous estimate in July, the fund announced at its annual meetings in Bangkok. However, it cut its growth forecast for 2027 to 1.2% from 1.3%, citing concerns that higher energy prices and rising interest rates would weigh on consumption and investment.
Silvana Tenreyro, the IMF's economic counsellor, urged Chancellor John Healey to continue with his deficit reduction plans. She said the UK "stands out" among G7 countries for having a plan to narrow its deficit and advised the government to "stay the course" on its consolidation process.
The stronger-than-expected growth came as UK GDP expanded 0.6% in the first quarter and 0.5% in the second quarter of 2026. The IMF warned that the global economy "could soon test the limits of resilience" as prolonged high oil prices and rising interest rates threaten expansion.
On inflation, the IMF expects average UK inflation to reach 3.3% this year and remain at 2.8% in 2027, with core inflation not returning to the 2% target until late next year. Bank of England policymaker Megan Greene argued the growth upgrade proved interest rates should be higher, citing evidence that slack in the labour market may have peaked.