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IMF upgrades UK by largest amount for any advanced economy

ended 22. October 2024

The International Monetary Fund (IMF) has raised its UK growth forecast for this year by 0.4%, now projecting a growth rate of 1.1%—the largest upward revision among advanced economies.

In its latest world economic outlook, the IMF anticipates strengthening growth driven by "falling inflation and interest rates," which are expected to boost demand.

This revised outlook marks a significant increase from the IMF's July projection of 0.7% growth and is up by 0.6% from its assessment in April. Newspage's experts have offered their insight into the forecast - their views are below. 

4 responses from the Newspage community

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Editor
Riz Malik
Independent Financial Adviser at R3 Wealth
The IMF must know something we don’t on the day the it is announced that the country’s borrowing has surged. The UK economy seems poised to hobble along without any serious prospects for growth until a credible plan is established. Without the help of the A team that doesn’t appear to be anytime soon.
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Gabriel McKeown
Head of Macroeconomics at Sad Rabbit - Substack Newsletter
Following a dramatic revision, the latest IMF forecast has catapulted Britain from wallflower to the belle of the advanced economies ball. As price pressures continue to ease, the BoE is expected to loosen its monetary stance further, unleashing pent-up consumer demand and investment. These factors have been key drivers of this improved outlook, with lower interest rates reducing borrowing costs and potentially stimulating investment and consumption. This revised forecast signals a rerating of UK assets, with the FTSE long considered a laggard to global peers, potentially seeing renewed interest on the horizon. This is amplified by subdued outlooks for many advanced economies, positioning the UK as an attractive destination for global capital. However, the upcoming Budget could either cement Britain's phoenix-like rise from the ashes of uncertainty or see those very hopes go up in smoke, with Chancellor Reeves emerging as the potential kingmaker—or breaker—of this economic resurgence.
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John Choong
Head of Equities and Markets at Interpretiv
While the IMF's upgraded UK growth forecast might appear encouraging at first glance, Britain should keep the champagne in the fridge. The revision to 1.1% merely aligns with the OECD's projection from last month and hardly breaks any new ground.

Given the IMF's somewhat checkered forecasting history, their 1.5% growth projection for 2025 seems rather overly optimistic at this point, and deserves healthy skepticism. This is especially when we've seen GDP growth in H2 lag behind H1 thus far.

Whilst cooling inflation and easing mortgage rates might offer some respite to consumers' wallets, this silver lining comes with substantial dark clouds. Looming tax hikes and persistent equity market outflows are likely to act as significant counterweights to any uptick in consumer sentiment.

The reality is that these structural headwinds could substantially dampen the growth momentum as we roll into 2025, making the IMF's optimistic outlook seem more wishful thinking than economic reality.
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Prem Raja
Head of Trading Floor at Currencies 4 You
The recent news of the IMF raising its UK growth forecast is encouraging. With falling inflation and cheaper borrowing costs on the horizon, we should see a boost in demand within the UK. I'm still wary of the UK jobs market, but if it remains buoyant, the UK economy and Pound Sterling could experience positive months ahead. It will be interesting to observe how lower interest rates actually impact the economy; while they may weaken the Pound in the short term, this overall shift from the IMF represents a positive change for the future.