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The International Monetary Fund (IMF) has upgraded its forecast for UK economic growth as upcoming elections continue to drive global uncertainty.
According to new projections announced on Tuesday, British gross domestic product (GDP) is set to grow by 1.1% in 2024, faster than previously thought thanks to falling inflation and lower interest rates helping to drive spending. This is up from 0.7% in July.
It is then expected to grow by 1.5% in 2025, with the IMF maintaining its prediction from earlier in the year.
“It’s welcome that the IMF have upgraded our growth forecast for this year, but I know there is more work to do,” chancellor Rachel Reeves said. “That is why the budget next week will be about fixing the foundations to deliver change so we can protect working people, fix the NHS and rebuild Britain.”
The new figures will make the UK the joint third fastest-growing economy in the G7 this year, in line with France and behind the US which expected to grow by 2.8% and Canada, which is forecast to grow by 1.3%.
Italy is lagging behind with 0.7% growth, Japan with 0.3% and zero growth in Germany in 2024.
Read more: FTSE 100 LIVE: European stocks slip as UK government borrows £16.6bn in September
The financial agency held its forecasts steady for the overall global economy, saying that the battle against inflation has “largely been won”.
However, it said uncertainty around the economic outlook was still “high”, partly due to a raft of recent or forthcoming elections.
The IMF warned in its latest World Economic Outlook report that newly-elected governments “could introduce significant shifts in trade and fiscal policy”, which could alter future growth in some regions.
The organisation stuck with its forecast for 3.2% global growth this year, although predicted growth in 2025 has been revised down from 3.3% to 3.2%.
Pierre-Olivier Gourinchas, the IMF’s chief economist, said: “After peaking at 9.4% year-on-year in the third quarter of 2022, we now project headline inflation will fall to 3.5% by the end of next year, slightly below the average during the two decades before the pandemic.
“In most countries, inflation is now hovering close to central bank targets, paving the way for monetary easing across major central banks.”
Dan Coatsworth, investment analyst at AJ Bell, said: “There is a big risk the budget contains a lot of bad news for consumers and businesses and potentially causes a wobble to the UK economy.