Three things we've learnt about the UK economy from the IMF

Key Points:

• The IMF reports that despite disruptions in Middle Eastern energy supplies causing oil prices and inflation to rise, the global economy is performing better than expected, partly due to increased investment in artificial intelligence.
• The UK economy is projected to grow by 1.3% in 2026, an upward revision from 1% earlier, making it one of the fastest-growing economies in the G7 alongside Germany, although growth is expected to slow in 2027.
• The IMF highlights the UK’s relatively strong fiscal position, projecting it will have the lowest annual borrowing among G7 countries by 2031, attributed to government commitments to address deficits through tax increases, spending cuts, or both.
• Despite better-than-expected economic performance, the IMF warns that high energy prices and elevated interest rates will likely dampen consumer spending and business investment in the UK next year, with inflation forecasted to average 3.3% in 2024 and 2.8% in 2025, up from previous estimates.
• Experts note the UK’s fiscal discipline contrasts with other major economies like the US, France, and Germany, where political challenges have slowed efforts to reduce deficits, positioning the UK as relatively better prepared to manage its economic challenges.