UK economy to grow more than expected - but households face sharper rise in inflation, IMF says
The UK economy is set to grow faster than expected this year, though households are expected to face higher rates of inflation, according to forecasts from the International Moneta
By Sky News
The UK economy is expected to grow faster than previously forecast this year, but households face higher and more persistent inflation, the International Monetary Fund has said.
The IMF’s latest World Economic Outlook predicts that UK gross domestic product will increase by 1.3% in 2026. That is up from its previous forecast of 1%.
However, growth is expected to slow to 1.2% in 2027, compared with the earlier prediction of 1.3%. The IMF said higher energy prices and long-term interest rates were likely to weigh on consumption and investment.
The organisation also raised its inflation forecasts for the UK. Consumer prices are expected to rise by an average of 3.3% in 2026, up from the previous estimate of 3.2%.
That would place the UK’s inflation rate at the joint second-highest among the G7 group of major economies.
Inflation is forecast to ease to 2.8% in 2027, but that remains above the IMF’s earlier projection of 2.4% and higher than the Bank of England’s 2% target.
The IMF linked the higher outlook for prices to increased food and energy costs connected to the conflict in the Middle East.
It also said underlying UK inflation was expected to return to target levels later than previously anticipated, reaching them by the end of 2027.