(qlmbusinessnews.com . Wed 15th Oct, 2025) London, UK —
UK to Outshine G7 Economies in Growth While Battling High Inflation According to IMF 2023 Projections
The UK is forecasted to rank as the second quickest expanding economy among the world's leading nations this year, the International Monetary Fund (IMF) has projected.
However, the IMF's analysis also indicates that the UK will experience the highest inflation rate within the G7 nations for both the current and upcoming year, primarily due to escalating energy and utility costs.
These projections form part of the IMF's biannual review of the global economic scenario. The report notes a relatively “muted response” to the imposition of new tariffs on imports by the US earlier this year, although it acknowledges these measures are impacting global economic growth.
As an esteemed global economic organisation, the IMF plays a crucial role in fostering worldwide economic stability among its 190 member countries. Despite this, its forecasts can be susceptible to unexpected factors ranging from geopolitical tensions to natural phenomena.
As government officials convene in Washington DC, the latest figures from the IMF suggest the UK is faring comparatively well amidst a challenging year marked by trade disputes and geopolitical strife.
In 2025, the UK's economic performance is expected to surpass that of its G7 counterparts, with the exception of the US, despite maintaining modest growth rates of 1.3% for this and the following year.
Per capita, the economic output in the UK is projected to increase by 0.4% this year and by 0.5% in 2026, placing the UK at the lower end of the G7 rankings.
Chancellor Rachel Reeves, who recently arrived in Washington, expressed concerns over the economy, noting that many people feel it is “stuck”. She affirmed her commitment to addressing these challenges, particularly at the IMF meeting, positioning the UK as a promising destination for investment.
Nevertheless, the IMF has highlighted the UK's inflation issues, indicating a projected rise of 3.4% this year and 2.5% in 2026, hoping it would settle back to 2% by the year's end.
During a separate event in Washington, Bank of England governor Andrew Bailey shared his optimism that inflationary pressures were beginning to subside. This came after recent data showed an increase in unemployment and a slowdown in wage growth in the UK.
Shadow chancellor Sir Mel Stride criticised the current economic strategy, citing the IMF report as “grim reading” and accusing the Labour government of worsening living costs, increasing debt, and undermining business confidence.
The IMF's global review also focused on the impact of US tariffs, a weakening dollar, concerns over the Federal Reserve's independence, and the high valuation of US tech companies. IMF Chief Economist Pierre-Olivier Gourinchas remarked that while the tariff shock had a negative effect, the worst outcomes of a global trade war had been somewhat mitigated.
Brexit was mentioned as an instance of how trade uncertainty could eventually lead to a decline in investment. Gourinchas advised caution regarding any reduction in interest rates by the Bank of England due to persistent high inflation expectations.
The IMF expects Canada to momentarily fall behind due to the US trade war but to regain its position next year with a 1.5% growth rate. In contrast, Germany, France, and Italy are all predicted to experience slower growth.
Additionally, the IMF warned against overly optimistic expectations surrounding AI, suggesting a possible market correction. It described the financial market's attitude as “complacent”, with concerns over a potential tech bubble burst emphasized by the significant valuation of a small number of companies.
Gourinchas acknowledged the risks but also noted the positive contribution of the AI investment surge to US economic growth.
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