IMF Raises UK Growth Forecast Before 2027 Slowdown

The International Monetary Fund raised its UK economic growth forecast for 2026 to 1.3% in its latest outlook released in Bangkok, Thailand, as stronger-than-expected activity offsets risks from energy prices and interest rates that are expected to weaken growth in 2027.

According to the IMF, the revised 2026 projection is up from 1% in July. The fund expects UK growth to slow to 1.2% in 2027 as higher energy costs and long-term interest rates weigh on household spending and business investment.

The IMF said global economies have shown resilience despite energy shocks linked to the US-Iran war, but warned the consequences remain "highly uncertain". The fund also said the UK is among the few major economies on track to stabilize national debt.

IMF chief economist Silvana Tenreyro said the UK has already begun reducing borrowing pressures and should maintain its current approach.

"As you know, the UK has already started the consolidation process and it is the country that basically stands out, along with India," said Silvana Tenreyro, IMF chief economist.

Tenreyro also told the BBC that Britain should continue its fiscal strategy. The IMF has advised governments to make support measures temporary and targeted rather than broad subsidies.

"Stay the course," said Silvana Tenreyro, IMF chief economist.

UK Chancellor John Healey said conflicts in the Middle East and Europe were affecting households, while the government prepares its Budget plans for 28 October.

"Provide some breathing space," said John Healey, UK Chancellor.

"Britain's economy is showing strong international resilience," said John Healey, UK Chancellor.

Healey is under pressure to address rising energy costs before expected winter bill increases. The IMF forecast average UK inflation at 3.3% in 2026 and 2.8% in 2027.

"Better than it might have been," said Sir Howard Davies, former deputy governor of the Bank of England.

Davies said the IMF outlook remained more cautious for 2027 and highlighted global interest rate pressures.

"More pessimistic," said Sir Howard Davies, former deputy governor of the Bank of England.

"A bit of a sideshow," said Sir Howard Davies, former deputy governor of the Bank of England.

"That is what is putting pressure on interest rates all over the world and that is what is affecting us as well. Unless the US does something about its deficit, we can expect interest rates to be higher, which of course increases our debt interest costs," said Sir Howard Davies, former deputy governor of the Bank of England.

The Resolution Foundation called for public finance improvements while supporting households facing heating costs. Conservative shadow chancellor Andrew Griffith criticized possible tax increases.

"Make repairs," said the Resolution Foundation.

"Struggling to heat their homes," said the Resolution Foundation.

"Reaches for more tax rises," said Andrew Griffith, Conservative shadow chancellor.

Mayor Andy Burnham has proposed wider regional control plans, including a goal of creating economic growth across areas.

"Good growth in every postcode," said Andy Burnham.

The IMF said the global economy has absorbed several major disruptions in recent years, including the Covid pandemic and Russia's invasion of Ukraine.

"Remarkable capacity to absorb shocks," said the International Monetary Fund.

The IMF annual meetings in Bangkok are expected to include discussions on limiting economic effects from international conflicts, while Healey prepares final Budget decisions before the 28 October announcement.