UK Economy Set for Marginal Growth Amid Falling Inflation

The UK economy is anticipated to experience a slight deceleration this year, as inflation decreases to 2 per cent and interest rates are lowered, according to the International Monetary Fund. In its latest economic assessments, the IMF has projected that the UK’s annual Gross Domestic Product will grow by 1.3 per cent this year, following a 1.4 per cent increase in 2025. This revision reflects a positive adjustment from the previously estimated 1.3 per cent growth for the last year, with expectations of a further rise to 1.5 per cent in 2027.

The forecasts indicate that the UK will rank as the third-fastest growing economy within the G7 this year, trailing only the United States and Canada. The anticipated growth rate aligns with that of the 21 countries in the eurozone. Notably, the UK is set to outperform Germany, France, and Italy, which are projected to grow at 1.1 per cent, 1 per cent, and 0.7 per cent respectively.

Chancellor Rachel Reeves has expressed optimism regarding this trend, stating that after a prolonged period of stagnation, the country is poised to turn a corner. This marks the third consecutive upgrade to the UK’s growth forecast since April 2025, reinforcing the notion that Britain is an attractive destination for investment.

According to the IMF, consumer price inflation is expected to fall rapidly from the current rate of 3.2 per cent, reaching the Bank of England’s target for the first time since 2021. As the labour market weakens, downward pressure on wage growth is likely to contribute to this decline.

The IMF’s assessment extends to the US economy as well, which is expected to accelerate, benefiting from a surge in investments related to artificial intelligence technologies. This projected growth reflects the resilience of the private sector, despite tensions stemming from trade restrictions.

As the global economic landscape continues to shift, the projected economic performance of the UK places it in a competitive position among its peers and presents opportunities for both domestic and international investors.