IMF lifts UK growth forecast for 2026, trims global projection

The International Monetary Fund nudged its global growth forecast a touch lower on Wednesday, but upgraded its expectations for the UK.

In its July World Economic Outlook, the IMF said it now expects global growth of 3% this year, down from a forecast of 3.1% in April. It’s also below the average of 3.5% seen in 2024–25.

"The modest slowdown reflects the effects of the war in the Middle East being partly offset by accelerated demand-driven momentum in the global technology cycle thanks to advances in artificial intelligence (AI) and its adoption," the IMF said.

"The impact varies widely based on countries’ exposure to the war and position in the technology value chain. Energy exporters outside the conflict zone benefit from favourable terms of trade, whereas economies plugged into the technology-led upturn experience stronger activity even if they are energy importers.

"In contrast, activity weakens for energy importers with limited participation in the technology value chain, a group that includes many low-income countries."

The IMF expects global headline inflation to rise to 4.7% in 2026 from 4.1% a year earlier, before falling to 3.9%. "Slightly revised upward from April, these projections indicate that the disinflation trend in place since the beginning of 2024 has stalled," it said.

In the US, the IMF expects growth of 2.3% this year, unchanged on April, while the European forecast for this year was trimmed to 0.9% from 1.1%. For China, the IMF expects growth of 4.6% in 2026, down from 4.4% in April.

The forecast for UK growth was lifted to 1.0% from 0.8% for 2026. That would put the UK third in the G7, behind the US and Canada, and ahead of Italy. The UK growth forecast for 2027 was unchanged at 1.3%.

Barret Kupelian, chief economist at PwC UK, said: "The world economy has absorbed the energy shock better than expected, helped by inventories, stockpiling and the AI boom. For the UK, however, the business implications are bigger than the headline growth number suggests. As a net energy importer operating in an uncertain global trading environment, the UK remains exposed to more volatile inflation. For businesses, that means caution at precisely the moment when policymakers want the private sector to use its relatively healthy balance sheets to invest and grow the economy.

"The UK has received a growth upgrade, but businesses still need a certainty upgrade. Providing domestic certainty against a backdrop of international uncertainty should therefore be a priority for policymakers."