Through the branches of trees in Ruskin Park are the illuminated terraces of period terraced houses and in the background, the growing development at Nine Elms, on May 14, 2024, in London, England.
Richard Baker | In pictures | Getty Images
LONDON — The International Monetary Fund on Tuesday raised its 2024 UK growth outlook to 0.7% from 0.5%, giving the country’s new government a further boost.
Looking ahead, the Washington-based IMF reiterated its forecast for UK growth of 1.5% in 2025 in its July World Economic Outlook update.
The upgrades come after two years of stagnation, with the UK falling into a shallow recession in the second half of 2023. However, GDP growth in May was above analysts’ expectations at 0.4%, while summer events including of the Euro 2024 soccer championship and even Taylor Swift’s Eras Tour is expected to boost economic activity.
Investment bank Goldman Sachs earlier this month raised its 2025 forecast for the UK economy by 0.1 percentage point higher to 1.6%. He outlined the budget plans of the new Labor government under Prime Minister Keir Starmer, which include planning reform and closer trade ties with the European Union.
Deutsche Bank on Friday joined Goldman in upgrading its outlook for the UK, with economists saying in a note that they now expect GDP growth of 1.2% this year, well above their previous forecast of 0.8% .
The country’s gross domestic product in May showed the strength of the professional services and construction sectors, Deutsche Bank said, with the Euro tournament expected to give a further boost to hospitality and leisure.
Meanwhile, analysts at Jefferies said in a recent note that the size of Labour’s parliamentary majority would make the UK look “relatively stable” and that, combined with regulatory reform, could increase the attractiveness of assets in the country.
It comes as the Bank of England is expected to start cutting interest rates in the coming months. UK inflation hit the central bank’s 2% target in May and economists polled by Reuters see it falling further to 1.9% in Wednesday’s print edition.
Other economies where growth in 2024 was upgraded by the IMF on Tuesday included the euro zone, which it raised by 0.1 percentage point to 0.9%, Spain, which rose 0.5 percentage point to 2.4% and China , by 0.4 percentage points to 5%.
It cut its forecast for the US economy by 0.1 percentage point to 2.6%.
The agency sees global growth at 3.2 percent this year and said global activity and global trade were more stable, particularly due to strong exports from Asia.
However, he warned that the services sector is broadly holding back the deflation process, complicating monetary policy decisions.
“Upside risks to inflation have therefore increased, raising the prospect of higher for even higher interest rates amid escalating trade tensions and heightened political uncertainty,” it said in the World Economic Outlook.
— CNBC’s Sophie Kiderlin and Vicky McKeever contributed
