The International Monetary Fund (IMF) has urged Chancellor John Healey to "stay the course" in repairing the UK's public finances, following an upgrade to the country's growth forecast. Silvana Tenreyro, the IMF's economic counsellor, noted that the UK "stands out" among G7 nations for its strategy to reduce its deficit.
The IMF has increased its UK GDP growth forecast for 2026 to 1.3%, up 0.3 percentage points from its July update. This comes after stronger-than-expected growth in the first two quarters of 2026, partly attributed by the Office for National Statistics to the expansion of AI-related businesses.
Despite the upgrade, the IMF anticipates a modest slowdown in 2027, cutting its growth forecast for next year to 1.2% from 1.3%. This is due to the expected impact of higher energy prices and long-term interest rates on consumption and investment. The IMF also warned that growth could "edge down" in 2027.
Healey is preparing for his first budget on 28 October, where he faces pressure to announce an energy support package ahead of expected bill increases in January. However, the IMF advises against broad subsidies, recommending any support be "temporary, targeted and non-distortionary."
The IMF expects average inflation in the UK to reach 3.3% this year and remain at 2.8% in 2027. It also singled out the UK as one of the countries where core inflation is not projected to return to the 2% target until late next year.