The International Monetary Fund has increased its growth forecast for the UK this year, but has said that it expects a modest slowdown in 2027 as higher energy prices take effect.
The upgrade will be welcome news for the chancellor, John Healey, who will arrive in Bangkok later this week to attend the IMF’s annual meetings for the first time.
The IMF, which publishes its World Economic Outlook twice a year, has predicted GDP growth of 1.3% for the UK this year – up 0.3 percentage points from its most recent update in July.
However, the IMF also warned that high oil prices and rising interest rates meant growth was likely to “edge down” in 2027, “as higher energy prices and long-term interest rates weigh on consumption and investment”.
It cut its UK growth forecast for next year modestly to 1.2%, from 1.3%.
The IMF singled out the UK as among the countries where core inflation – which excludes volatile commodities such as energy – is not expected to return to the 2% target until late next year.
It expects average inflation in the UK to be 3.3% this year, and to remain at 2.8% in 2027 – a challenge for Healey and the prime minister, Andy Burnham, who are promising to offer voters a “breathing space” from rising costs.
It comes just weeks before Healey’s first budget on 28 October. He is expected to focus on plans to devolve more tax revenues to mayoralties, as well as measures to help households cope with higher energy bills ahead of the winter.
The Institute for Fiscal Studies warned this week that the budget would be a “work of fiction” unless Healey explained how he would deal with what it said were £35bn of future spending pressures.
The IMF’s growth upgrade follows from the fact that UK GDP has been stronger than expected in early 2026, at 0.6% in the first quarter and 0.5% in the second quarter.
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