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    IMF raises UK GDP growth forecast for 2024 as Reeves prepares budget

    Mars Posted on

    WASHINGTON, Oct 22 (Reuters) – The International Monetary Fund on Tuesday raised its forecast for Britain’s economic growth this year, offering a small boost to Finance Minister Rachel Reeves as she presents her first annual budget next week.

    The IMF said the upward revision was due to lower inflation and a cut in interest rates from the Bank of England, but it did not revise its outlook for 2025 upwards.

    The news is likely to be seized upon by Conservative opponents of the new Labor Party government, who dispute Reeves’ claim that they have left the party with a poor economic legacy after their 14 years in power.

    “Growth is expected to accelerate to 1.1% in 2024 and is expected to continue to do so to reach 1.5% in 2025, as lower inflation and interest rates boost domestic demand,” it said. the IMF in its quarterly update of its global forecasts.

    In July, the IMF predicted that the UK economy would grow by 0.7% this year. Britain is now on course to have the third fastest growing Group of Seven advanced economies, alongside France, having tied for fourth place with Japan and Italy in July.

    The IMF’s forecasts for UK economic growth in 2024 are now higher than those of the country’s budget forecasters whose projections support the government’s fiscal plans.

    But the IMF is less optimistic about 2025 than the Office for Budget Responsibility, limiting Reeves’ benefits from higher tax revenues.

    Reeves welcomed the IMF’s higher growth forecast for 2024 and said she would continue measures in her Oct. 30 budget to shore up public finances.

    “That’s why next week’s Budget will be about repairing the foundations of change, so we can protect workers, repair the NHS (National Health Service) and rebuild Britain,” she said in a press release.

    Reeves and Prime Minister Keir Starmer have suggested that higher taxes on employers and the wealthiest people are likely to be among the changes announced next week.
    Last year, the UK economy grew by just 0.3% and suffered a slight recession in the second half, but it rebounded relatively strongly in the first six months of 2024.

    This year, inflation is expected to average 2.6% – the second highest in the G7 after the United States – before averaging 2.1% in 2025, close to the 2% target. of the BoE.

    Inflation fell to a three-year low of 1.7% in September and, although the BoE expects a slight recovery, markets expect the central bank to cut inflation costs again. borrowing next month, after a first quarter-point rate cut to 5% in August. .

    Adjusted for population growth, Britain’s economic performance is less impressive. The IMF estimates that UK GDP per capita will rise by 0.6% this year and 1.1% next year – a far cry from Reeves’ target of topping the G7 on this measure for two years consecutive.

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    Reporting by David Milliken; Editing by William Schomberg and Hugh Lawson

    Our Standards: The Thomson Reuters Trust Principles.open a new tab

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