The British economy is poised to “accelerate”, the International Monetary Fund (IMF) said as it raised its growth forecasts for this year.
The influential global organization now expects UK growth of 1.1% this year, up from 0.7% forecast three months ago.
Although slow compared to previous periods, this would put the UK in the middle of the pack of global nations.
The IMF's outlook contrasts with Chancellor Rachel Reeves' assessment of the UK economy after she claimed Labor had inherited the “worst circumstances since the Second World War” after 14 years of Conservative rule.
The chancellor is expected to outline tax rises and spending cuts aimed at raising £40 billion in next week's Budget.
Reeves welcomed the IMF's more optimistic forecast, but said: “I know there is still work to do.” »
The IMF and the UK government disagree on previous forecasts and economic forecasts are not always accurate.
The IMF has previously said its forecasts for most advanced economies, such as the UK, are most often within around 1.5 percentage points of reality.
IMF global forecasts show the global economy has proven resilient, with wealthier countries making up for growth lost during the pandemic.
The United States continues to outperform all its peers in the G7 group of advanced economies as the presidential election approaches. Its economy is expected to grow 2.8% this year and 2.2% next year.
The United States recorded productivity gains that exceeded wage growth and were, according to the IMF, “supported by substantial immigration flows that helped cool labor markets.”
Europe's major economies remain sluggish, particularly Germany, but Spain is growing rapidly, at 2.9% this year and 2.1% next year.
Ahead of what is expected to be a tough budget, the IMF has backed maintaining and increasing public investment as “positive” for growth, particularly in areas that boost productivity and competitiveness, e.g. digital infrastructure and public.
The IMF pointed to internal research showing that countries that spend a high proportion of their budgets on investment have significantly faster economic growth.
Reeves inherited Conservative plans for a notable reduction in public investment, measured as a share of the national economy.
The Treasury has made clear in recent days that it could reverse this policy, maintaining or increasing investments.
Reeves is also expected to confirm in the budget that the way the government sets its own rules for reducing the national debt will change to allow more investment in infrastructure projects.
Elsewhere in the world, Russia's sanctions-hit economy has once again seen its forecasts revised upwards, as its shift to a war economy supports growth. This year, it is expected to grow by 3.6%.
However, growth is expected to fall significantly next year, to 1.3%, due to slowing private consumption and investment.
The IMF has raised concerns that emerging economies are left with “permanent scars” and more persistent inflation following recent global crises.
