Economic Buzz: UK's economic recovery expected to gain momentum this year says IMF

Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for the United Kingdom. It noted that the economy rebounded in Q1 2025, after weaker growth in the second half of 2024. The growth recovery in the first quarter was mainly driven by business investment. After easing to 1.7 percent in September, headline inflation picked up again in the fall mainly because of waning effects from lower energy prices. Wage growth continued to moderate as the labor market showed signs of easing. Monetary policy has remained restrictive, despite the gradual reduction in Bank Rate, and the stance of fiscal policy was broadly unchanged in FY2024/25 (relative to the previous year).

UK’s economic recovery is expected to gain momentum this year and next. Growth is projected at 1.2 percent in 2025 and 1.4 percent in 2026, as monetary easing, positive wealth effects, and an uptick in confidence bolster private consumption, while the boost to public spending in the October budget will also help support growth. The forecast assumes that, all else equal, global trade tensions lower the level of UK GDP by 0.3 percent by 2026, due to continued uncertainty, slower activity in UK trading partners, and the direct impact of remaining US tariffs on the UK. The pickup in headline inflation that started in the second half of 2024 is expected to continue as a result of regulated price increases.

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