IMF upgrades growth forecast but warns Reeves – Daily Business

A new forecast for the UK economy suggests it will grow slightly more than previously expected this year.

The International Monetary Fund (IMF) predicts growth of 1.25% for 2025, rising to 1.4% next year as the economic recovery is “under way”.

While the revision will be welcome news for the Labour government amid poor opinion poll ratings, the IMF has warned that the Chancellor must stick to her rules on tax and spending.

Its forecast comes just over a month after it downgraded its expectations for the UK from 1.6% in 2025 to 1.1%, indicating the volatility caused by geo-political tensions.

Explaining the latest upgrade, Luc Eyraud, the IMF’s UK mission chief, said UK growth had been “very strong” in the first three months of the year.

Government figures revealed the economy was boosted by increases in consumer spending and business investment.

However, they they pre-dated US president Donald Trumps’s tariffs and a series of tax rises that came into effect in April.

That said, the IMF saie a number of government initiatives such as panning reforms and infrastructure investment plans, should increase growth “if properly implemented”.

It insisted that the Chancellor Rachel Reeves needed to balance taxation with spending in the long term and this would mean some “difficult choices”.

The Chancellor said the government’s trade deals were “protecting jobs, boosting investment and cutting prices”.