IMF Upgrades UK Growth Forecast to 1.3% for 2026 but Warns Higher Energy Prices and Interest Rates Will Slow Expansion in 2027

The International Monetary Fund (IMF) published its October 2026 World Economic Outlook at its annual meetings in Bangkok on Tuesday 13 October, revising upward its forecast for the UK economy to grow by 1.3% in 2026, up from the 1% projected in July, before growth slows to 1.2% in 2027. The UK is now expected to be among the second-fastest growing economies in the G7 (the group of the world's most advanced economies) alongside Germany. The revision reflects greater-than-expected resilience across global economies in absorbing the energy price shock caused by what the IMF describes as the US-Iran war, though it warned the economic fallout remains "highly uncertain". For 2027, the IMF projects growth will slow as higher energy prices and long-term interest rates weigh on household spending and business investment. The IMF forecast UK inflation at 3.3% on average in 2026, remaining above the Bank of England's 2% target in 2027 at 2.8%. The Bank itself has predicted inflation could rise above 4% at the start of next year, increasing the probability that interest rates will rise. On fiscal credibility, the IMF projected the UK would have the lowest annual government deficit (the gap between government spending and tax revenues in a year) of all G7 countries by 2031, at -1.4% of GDP. Chancellor John Healey is finalising the government's tax and spending plans for a Budget to be announced on . The Resolution Foundation think tank called on the chancellor to make "repairs" to the public finances while providing targeted support for households ahead of a difficult winter driven by energy costs. At a global level, the IMF raised its forecast for global growth to in 2026, citing the AI-driven investment boom as a partial offset to energy cost headwinds, while warning that economic resilience "is reaching its limits".