IMF Adjusts UK 2025 Growth Forecast to 1.2% After Strong Q1 Results

2025-05-28 economy

London, Wednesday, 28 May 2025.
The UK’s projected growth now stands at 1.2% for 2025, following robust Q1 performance. This upgrade comes despite ongoing global trade tensions that could affect growth.

Understanding the IMF’s Forecast Revision

The International Monetary Fund (IMF) recently adjusted its forecast for the UK’s GDP growth in 2025 to 1.2%, up from an earlier prediction of 1.1% made just a month prior. This revision reflects a notable economic performance in the first quarter of the year, where the UK’s economy showed resilience, buoyed by stronger-than-expected business investments [1][2].

Key Drivers of Economic Growth

The UK economy’s growth in the first quarter of 2025 was described as the fastest among the world’s seven largest economies. Business investments played a crucial role in this progress, highlighting a thriving environment for capital allocation and infrastructure projects [3]. Additionally, government initiatives, including trade agreements with significant partners like the US, EU, and India, are praised for their potential to further bolster the economy by protecting jobs and stimulating investment [4].

Trade Tensions and Future Implications

Despite the positive outlook, the IMF warns about the persistent global trade tensions that could impede the UK’s economic trajectory. The remaining US tariffs on UK goods, coupled with uncertainties in global supply chains, are expected to reduce the GDP by 0.3% by 2026 [5][6]. Such tensions underscore the complexity of the macroeconomic environment that Britain must navigate in the coming years.

Fiscal and Monetary Strategy Moving Forward

The IMF’s report suggests that the UK’s current fiscal policies strike a pivotal balance between promoting growth and ensuring fiscal sustainability. It emphasizes the importance of continuing deficit reduction plans while maintaining flexible monetary policies in response to economic uncertainties and volatile inflation rates [7]. The Bank of England’s gradual approach to monetary easing remains a strategic move aimed at stabilizing the economy in the face of potential challenges [8].

Long-Term Projections and Challenges

Looking ahead, the IMF projects a UK growth rate of 1.4% in 2026, emphasizing the long-term challenges of overcoming weak productivity which continues to hinder significant economic improvements. Addressing these productivity issues through targeted structural reforms and strategic investments will be integral to sustaining economic growth and improving living standards [9].

Sources

GDP growth UK economy