IMF upgrades UK economic growth as elections drive global uncertainty
It came as the financial agency held its forecasts for the global economy steady for 2024, with a slight downgrade for next year.
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The UK economy is set to grow faster than previously thought in 2024 as drops in inflation and interest rates help drive spending, according to new projections by the International Monetary Fund (IMF).
It came as the financial agency held its forecasts for the global economy broadly steady and declared that the battle against inflation has “largely been won”.
However, it said uncertainty around the economic outlook is “high”, partly due to a raft of recent or forthcoming elections.
The IMF warned in its latest World Economic Outlook report that newly elected governments “could introduce significant shifts in trade and fiscal policy”, which could alter future growth in some regions.
It also warned over recent volatility in the financial markets during the summer, with Japanese markets witnessing their worst day of trading for decades in August before staging a recovery.
Recent volatility “has heightened anxiety over the appropriate monetary policy stance – especially in countries where inflation is persistent and signs of slowdown are emerging,” the report said.
The IMF maintained its projection that the world economy will grow by 3.2% in 2024 in its latest update.
It predicted that the economy will also grow by 3.2% next year, in a slight reduction from its previous estimate of 3.3%.
The organisation meanwhile said UK gross domestic product (GDP) is due to grow by 1.1% in 2024.
It represents a significant upgrade after predicting 0.7% growth in July.
The UK economy is then expected to grow by 1.5% in 2025, with the IMF maintaining its prediction from earlier in the year.
It’s welcome that the IMF have upgraded our growth forecast for this year, but I know there is more work to do
Chancellor Rachel Reeves said: “It’s welcome that the IMF have upgraded our growth forecast for this year, but I know there is more work to do.
“That is why the Budget next week will be about fixing the foundations to deliver change so we can protect working people, fix the NHS and rebuild Britain.”
The IMF report also found that UK inflation for 2024 is set to be slightly higher than expected at 2.6%, having previously pointed towards a 2.5% reading.
It likewise slightly increased its inflation projection for 2025 to 2.1% from 2% in its previous outlook.
Unemployment is also set to be slightly worse than previously expected by the IMF, according to the latest report.
It said the UK unemployment rate is set to have been 4.3% for 2024 as a whole, compared with a previous 4.2% estimate.