The global financial institution has released its latest predictions for the global economy, and individual country economies.
IMF economists now expect the UK to grow by 1.1% this year, up from the 0.7% it forecast three months ago, and also up from the 0.3% growth we saw in 2023. The IMF also predicted the UK economy will grow by 1.5% next year, the same as its previous prediction for next year.
These latest predictions put the UK in the middle of the pack of global nations. The average “advanced economy” is predicted to grow by 1.8% both in 2024 and 2025. The US economy is set to grow the fastest – with estimates of 2.8% for 2024 and 2.2% for 2025.
Major economies in the Euro zone remain sluggish, especially Germany. However, Spain’s economy is expected to grow rapidly, by 2.9% this year and 2.1% next year.
Overall, the global economy is expected to grow by 3.2% in both 2024 and 2025, according to the IMF. There is also good news about the global battle against inflation.
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The IMF said: “After peaking at 9.4% year-on-year in the third quarter of 2022, we now project headline inflation will fall to 3.5% by the end of next year, slightly below the average during the two decades before the pandemic. In most countries, inflation is now hovering close to central bank targets, paving the way for monetary easing across major central banks.”
The upgrade puts the Government in a better position ahead of ‘difficult decisions’ in Budget next week.
Dan Coatsworth, investment analyst at AJ Bell, said: “Chancellor Rachel Reeves is looking for all the good news she can get ahead of the Budget and an upgraded UK economic forecast from the IMF has certainly come at the right time.
“Stronger than previously expected economic expansion this year means the government isn’t starting its ‘difficult decisions’ strategy to repair the nation’s finances from a very weak position. The IMF’s new UK forecast of 1.1% growth in 2024 is lacklustre compared to 3.2% world economic growth, but something is better than nothing given the uncertain backdrop.
“There is a big risk the Budget contains a lot of bad news for consumers and businesses and potentially causes a wobble to the UK economy. The government has a desire to make the country stronger but it feels like this will be a two-stage approach. First it must fill the multi-billion-pound black hole in public finances and only then can it be in a position to accelerate economic growth.”
The IMF predictions will be welcomed by the Government after the latest government spending and borrowing figures were revealed, with the Government overspending by £11.5bn in the past six months alone.
Rachel Reeves, Chancellor of the Exchequer, 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.”