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Economic growth

IMF Warns of Economic Growth Dampening due to Trade Tensions

Strategic Insights

— 1 min read

The International Monetary Fund (IMF) has revised its growth forecast for the UK upwards for this year, citing a period of robust economic activity and an "economic recovery." The global financial body has stated that the UK's GDP is expected to rise by 1.2 per cent this year, a step up from the 1.1 per cent growth it predicted in April. However, the IMF warns that trade tensions stemming from planned US tariffs are set to dampen the UK's economic growth next year, with the potential to wipe 0.3 percentage points off growth for the year.

Key Takeaways:

  • The IMF has revised its growth forecast for the UK upwards for this year, citing a period of robust economic activity and an "economic recovery."
  • The UK's GDP is expected to rise by 1.2 per cent this year, a step up from the 1.1 per cent growth it predicted in April.
  • The IMF warns that trade tensions stemming from planned US tariffs are set to dampen the UK's economic growth next year.
  • Trade tensions will weigh on growth through "persistent uncertainty, slower activity in UK trading partners, and the direct impact of remaining US tariffs on the UK."
  • The IMF highlighted a greater risk that growth could be weaker than expected, due to the potential that global trade uncertainty will impact supply chains and weaken private investment.
  • Policy reforms by the UK Government to overhaul planning rules and loosen regulatory hurdles could support future growth.
  • Chancellor Rachel Reeves has made growing the economy a key priority for the Government in order to help fund future spending plans.
  • The IMF has also stated that the central bank should "continue to ease monetary policy gradually," indicating it expects further reductions in interest rates.

Statistics:

  • UK's GDP expected to rise by 1.2 per cent this year.
  • Growth forecast ticked up from 1.1 per cent to 1.2 per cent.
  • Trade tensions set to wipe 0.3 percentage points off growth for the year.
  • IMF predicts UK economy will expand by 1.4 per cent in 2026.
  • Central bank interest rates reduced to 4.25 per cent, their lowest level since May 2023.

Sources:

  • IMF statement on the UK economy.
  • Rachel Reeves' quote in The Times.

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