London, UK, May 14, 2024 The bright porches of terraced houses are seen through the tree branches of Ruskin Park with the growing development of Nine Elms in the distance.
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LONDON – The International Monetary Fund on Tuesday raised its 2024 economic growth forecast for Britain to 0.7% from 0.5%, giving a further boost to the country’s new government.
Looking ahead, the Washington, D.C.-based International Monetary Fund reiterated its forecast for UK economic growth of 1.5% in 2025 in its July update of the World Economic Outlook.
The upgrade comes after two years of stagnation, with the UK slipping into a shallow recession in the second half of 2023. Summer events including the European Football Championship and even Taylor Swift’s Eras tour are expected to boost economic activity.
Investment bank Goldman Sachs earlier this month raised its forecast for the UK economy in 2025 by 0.1 percentage points to 1.6%. It cited Prime Minister Keir Starmer’s new Labor government’s fiscal plans, which include planning reforms and closer trading ties with the EU.
Deutsche Bank joined Goldman Sachs in brightening the UK outlook on Friday, with economists saying in a report that they now expect GDP to grow 1.2% this year, well above their previous forecast of 0.8%.
Deutsche Bank said the country’s gross domestic product in May showed the strength of industries such as professional services and construction, and the European Cup is expected to further promote the development of the hotel and leisure industries.
Meanwhile, Jefferies analysts said in a recent report that a Labor majority in parliament would make the UK appear “relatively stable”, while regulatory reforms could make the country’s assets more attractive.
The Bank of England is expected to start lowering interest rates in the coming months. British inflation reached the central bank’s 2% target in May, and economists polled by Reuters expected the inflation rate to fall further to 1.9% on Wednesday.
Other economies that the International Monetary Fund upgraded on Tuesday include the Eurozone (up 0.1 percentage points to 0.9%), Spain (up 0.5 percentage points to 2.4%) and China (up 0.4 percentage points to 5%).
It lowered its U.S. economic forecast by 0.1 percentage point to 2.6%.
The organization forecasts global economic growth of 3.2% this year and said global activity and world trade were firmer, particularly due to strong exports from Asia.
However, it warned that the services sector generally hindered the deflation process and complicated monetary policy decisions.
“Upside risks to inflation have increased as a result, against a backdrop of escalating trade tensions and growing policy uncertainty, raising the likelihood that interest rates will move higher for a longer period,” it said in its World Economic Outlook.
— CNBC’s Sophie Kiderlin and Vicky McKeever wrote
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