The International Monetary Fund (IMF) has raised its UK growth forecast for 2026 to 1.3%, up from the 1% it predicted in July, but warned that higher energy prices and interest rates would slow expansion to 1.2% in 2027.
The upgrade puts the UK among the second-fastest-growing G7 economies alongside Germany.
The IMF said global economies had proved more resilient than expected to the energy price shock caused by the US-Iran war, though the economic fallout remained “highly uncertain.”
Inflation is expected to average 3.3% this year and remain above the Bank of England’s 2% target at 2.8% in 2027, making further interest rate rises more likely.
The IMF also highlighted the UK’s progress on public finances, saying it was one of the only major economies on course to stabilise national debt.
IMF chief economist Silvana Tenreyro told the BBC the UK stood out alongside India in its fiscal consolidation efforts and should “stay the course.”
The IMF projects the UK will reduce annual borrowing by nearly four percentage points of GDP between 2025 and 2031, more than any other G7 nation, and will have the lowest annual borrowing in the group by 2031.
Chancellor John Healey, attending the IMF’s annual meeting in Bangkok, said Britain’s economy was showing “strong international resilience” but acknowledged that conflicts in the Middle East and Europe were “hitting people in the UK.”
His first Budget is due on 28 October.
