The International Monetary Fund (IMF) has projected a notably strong economic performance for the United Kingdom in 2025, forecasting it to be the second-fastest growing economy within the Group of Seven (G7) nations. This upward revision in growth expectations, detailed in the IMF’s latest World Economic Outlook (WEO), signifies a period of robust expansion for the UK, outpacing several of its advanced economic counterparts.
Despite this optimistic growth outlook, the IMF also anticipates the UK will contend with the highest rate of inflation among G7 nations for both 2025 and 2026. This elevated inflation is primarily attributed to escalating energy and utility costs. The IMF projects prices in Britain to increase by 3.4% in 2025, moderating to 2.5% in 2026. However, these inflationary pressures are expected to be transient, with a predicted return to the IMF’s 2% target before 2027.
The upward adjustment to the UK’s growth forecast for 2025 is supported by strong economic expansion observed in the first half of the year. This marks the second consecutive instance of the IMF enhancing its growth projections for the UK’s current year performance. The British Finance Minister, Rachel Reeves, has acknowledged this positive revision, while also emphasizing that this is a starting point and that for many citizens, the economy still feels stagnant.
Globally, the IMF’s updated forecast indicates a slightly less severe impact from prevailing trade tensions than initially feared, with global GDP projected to reach 3.2% for the year. The IMF noted that protectionist trade measures, including tariffs implemented by President Donald Trump, have thus far had a limited effect on economic activity and prices. This mitigation is partly due to companies and consumers front-loading consumption to preempt the full impact of these measures. The report also draws parallels with Brexit, suggesting that the influence of shifts in global trade policy on investment decisions can manifest over a longer timeframe.
A significant factor highlighted by the IMF as a potential disruptor to the global economic outlook is the intensified immigration crackdown in both the United States and the UK. The Fund posits that these policies could lead to a contraction in U.S. economic growth, estimated between 0.3% and 0.7%, and potentially fuel inflation in sectors heavily reliant on immigrant labor, such as construction and hospitality. The IMF’s analysis in the WEO report also touches upon concerns raised by its Managing Director, Kristalina Georgieva, regarding potential stock market corrections and investment downturns if generative artificial intelligence gains are overestimated by the market. Despite recent policy turbulence, surprisingly resilient stock market valuations have persisted, seemingly undeterred by these uncertainties.
Lucas turns raw market data into actionable strategies, spotting trends in a heartbeat. With 9 years managing portfolios, he treats market volatility like a surfer riding big waves—balance and timing are everything. On weekends, Lucas hosts “Bull & Bear Banter” podcasts, showing that finance discussions can be as entertaining as they are informative.