LONDON — The International Monetary Fund (IMF) has raised its 2024 growth forecast for the UK to 1.1%, an increase from 0.7% predicted in July. It also expects a 1.5% growth in 2025.
Inflation in the UK fell to 1.7% in September, down from 11.1% in October 2022. This drop has led economists to predict quicker interest rate cuts from the Bank of England, lowering the key rate from 5.25% to 4.5% by the end of 2024.
So far this year, economic growth has been slow, with only 0.2% growth in August after stagnant performance in June and July.
The IMF’s positive outlook comes as the Labour Party prepares to present its first budget in 14 years. Prime Minister Keir Starmer warns of “tough” decisions to address a projected £22 billion financing gap, although this figure is disputed by former Conservative leaders.
While major tax increases on income and corporations are off the table, other tax hikes are expected. This uncertainty has affected consumer confidence, but a recent report shows some improvement in household optimism and willingness to spend.
Finance Minister Rachel Reeves welcomed the IMF’s forecast revision, stating that more work is needed to achieve higher growth across the G7 nations.
On the same day, the IMF cut its euro zone growth forecast for 2024 to 0.8% and flagged challenges facing Germany’s economy, including competition in the auto industry and high energy prices. They also forecast growth of 2.8% in the U.S., 1.3% in Canada, and just 0.3% in Japan.
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