(Alliance News) - UK economic growth is set to accelerate this year after it missed forecasts in 2024, the International Monetary Fund has said.
The global economic body slightly upgraded its growth projection for the UK in a fresh update of its influential World Economic Outlook report.
The IMF said UK gross domestic product, GDP, is on track to grow by 1.6% in 2025, edging up from the 1.5% it predicted in October last year.
The improved growth prospects will provide a boost for under-pressure Chancellor Rachel Reeves, who has witnessed a turbulent start to the year for London's financial markets.
Concerns over potential stagflation – where growth is stagnating but inflation remains high – caused a jump in borrowing costs and fall in the pound this month.
However, both key metrics have eased back somewhat in recent days, driven by a slowing down of inflation in the UK and US.
Nevertheless, the latest IMF figures showed that the UK economy saw weaker growth last year than the organisation had forecast.
It indicated that UK economy grew by 0.9% last year, down from its previous forecast of 1.1%.
The growth reading was also predicted before the Office for National Statistics revealed on Thursday that UK GDP grew by a weaker-than-expected 0.1% in November.
This came after a 0.1% decline in October and a zero growth over the third quarter of the year.
The IMF said growth will accelerate to 1.6% in 2025 and 1.5% in 2026.
It predicted that the UK will see growth outstrip fellow European economies in Germany, France and Italy over the next two years.
It has forecast that the wider global economy will grow by 3.3% in both 2025 and 2026, with a 0.1 percentage point upgrade for this year.
"Global growth is expected to remain stable, albeit lacklustre," the report said.
Growth is expected to be above the previous forecast on the back of predicted stronger growth in the US.
The report added: "Inflation is declining, to 4.2% this year and 3.5% next year, in a return to central bank targets that will allow further normalisation of monetary policy.
"This will help draw to a close the global disruptions of recent years, including the pandemic and Russia's invasion of Ukraine, which precipitated the largest inflation surge in four decades."
In response, Chancellor Rachel Reeves said: "The UK is forecast to be the fastest growing major European economy over the next two years and the only G7 economy, apart from the US, to have its growth forecast upgraded for this year.
"I will go further and faster in my mission for growth through intelligent investment and relentless reform, and deliver on our promise to improve living standards in every part of the UK through the plan for change."
By Henry Saker-Clark, PA Deputy Business Editor
Press Association: Finance
source: PA
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