IMF Upgrades UK Growth Forecast Before 2027 Slowdown

The International Monetary Fund has raised its forecast for UK economic growth in 2026, saying the economy is expected to expand by 1.3% before higher energy prices and interest rates weigh on growth in 2027. The IMF published its latest global outlook while monitoring the effects of international conflicts.

According to the IMF report, the new 2026 projection is higher than the 1% estimate issued in July. The organization said economies worldwide have shown resilience to energy price shocks linked to the US-Iran war, although the consequences remain highly uncertain.

The IMF said the UK is among the few major economies expected to stabilize national debt levels. It projects the country will reduce annual borrowing by nearly four percentage points of GDP between 2025 and 2031.

The organization also forecasts that the UK will have the lowest annual borrowing in the G7 by 2031, while maintaining the longest debt maturity period among the group, according to its economic outlook.

IMF Chief Economist Silvana Tenreyro said the UK's debt management process has moved ahead of other major G7 economies.

"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 said the UK should continue its current approach after the IMF encouraged advanced economies to reduce borrowing and debt levels. The comments came as the government prepared upcoming tax and spending plans.

Chancellor John Healey said the government would seek measures to support households facing higher costs. He also acknowledged that conflicts in the Middle East and Europe were affecting people in the UK and globally.

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

The IMF expects UK inflation to average 3.3% this year and remain above the Bank of England's 2% target in 2027, reaching 2.8%. The Bank of England has warned inflation could rise above 4% early next year, increasing pressure on interest rates.

The Resolution Foundation called for public finance improvements alongside targeted support for households struggling with heating costs. Conservative shadow chancellor Andrew Griffith warned that further tax increases could slow economic growth.

Healey is expected to meet other finance ministers at the IMF annual meeting in Bangkok, Thailand, to discuss limiting the economic impact of conflicts in the Middle East and Europe.