The International Monetary Fund has forecasted in the latest World Economic Outlook (WEO) that the UK will be the second-fastest-growing G7 economy, behind the U.S. The IMF also said that the UK will face the highest rate of inflation among the G7 in 2025 and 2026, driven by surging energy and utility bills.

The Fund forecasts that Britain’s economy will rise in price by 3.4% this year and 2.5% in 2026. The IMF maintained that the higher inflation will likely be temporary and should fall to 2% before 2027.

Britain’s expansion in H1 2025 leads to an upward revision of its GDP

Britain’s economic growth stands at 1.3% for this year and the next, amid the heightened global trade tensions this year from President Donald Trump’s new tariffs. The IMF will be holding its annual meetings in the U.S. this week, where British Finance Minister Rachel Reeves and Bank of England Governor Andrew Bailey will be attending and discussing how the world is adjusting to the changes in global trade.

The UK’s growth rate is expected to be the third-fastest in the Group of Seven advanced economies for 2026, behind the U.S. and Canada. The IMF attributed the upward revision to Britain’s 2025 growth to strong expansion in the first half of the year.

“This is the second consecutive upgrade to this year’s growth forecast from the IMF. But I know this is just the start. For too many people, our economy feels stuck.”

-Rachel Reeves, Minister of Finance of the UK.

The IMF also updated its global forecast, which overall showed slightly less of an impact on the G7 economies than was highly anticipated due to the ongoing tariffs from the U.S. Global GDP is expected to rise to 3.2% from 3% predicted at the last update in July, while next year’s global growth rate forecast remains unchanged at 3.1%. 

The IMF mentioned that, to date, protectionist trade measures have had a limited impact on economic activity and prices. It stated that Trump’s levies were less extreme than expected and that their impact was mitigated by companies and households front-loading their consumption to avoid the impact.

The Fund pointed to Brexit’s slowdown in economic growth as evidence that the impact of the change in global trade policies may take time to be reflected in investment decisions. According to the report, the UK’s economic growth continued to surge in the period immediately after its exit from the European Union. It only began falling steadily at the beginning of 2018.

Immigration crackdown threatens global economic growth outlook

The IMF believes that the U.S. and the UK’s immigration crackdown could disrupt the global outlook. It argued that the crackdown has stretched valuations in stock markets, as the impact of the tariffs is only now beginning to be felt in the economy.

The Trump administration has intensified its stance on immigration in the U.S., which the IMF forecasts could result in a decline of around 0.3% to 0.7% in U.S. economic growth. The Fund also expects an increase in inflation in the worst-affected industries in the U.S., especially certain sectors where immigrants form a large portion of the labour force, such as construction, hospitality, personal services, and farm work.

The IMF maintained that the resilience from trade-related disruptions in some economic data causes the outlook for the global economy to continue pointing to dim prospects. It also highlights more stringent immigration policies in several countries as a cause for concern regarding future GDP growth.

The WEO report also echoed a speech by Kristalina Georgieva, Managing Director of the IMF, warning of the risks of a correction in share prices and a downturn in investment if the market overestimates the likely gains from generative AI. The IMF stated that the stretched valuations in the stock market have surprisingly not deterred investors amid the recent policy turmoil.

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