The International Monetary Fund (IMF) has raised its growth forecast for the UK economy this year, but also cautioned that the economic policies of incoming US President Donald Trump could have significant global repercussions.
The IMF now predicts the UK economy will grow by 1.6% in 2025, slightly up from its previous estimate of 1.5%. This revision offers some optimism for the UK, especially after recent reports showed stagnation in the country’s economic growth.
However, the IMF warned that Trump’s proposed economic policies, particularly his plans for tariffs, could lead to worsening trade tensions and disrupt global supply chains. The IMF noted that while short-term tax cuts, deregulation, and tariffs could provide a boost to the US economy, these measures may ultimately lead to longer-term negative effects, including higher inflation and reduced investment worldwide.
Trump’s plan to impose tariffs on imports, including from China, Canada, and Mexico, has caused concern among global leaders. Many fear that such tariffs would increase the cost of doing business in the US, affecting both international companies and consumers. The incoming president has also threatened to levy 100% tariffs on the BRICS nations if they create a rival currency to the US dollar, adding to uncertainties about global trade.
The IMF warned that these protectionist policies could spark an inflationary boom, followed by an eventual economic downturn, which might weaken the attractiveness of US Treasury bonds as a safe investment.
Despite the challenges posed by global uncertainties, the IMF’s upgraded forecast for the UK is a positive sign, especially compared to the outlook for other major European economies, such as Germany, France, and Italy. The IMF believes the UK will experience stronger growth than these countries over the next two years.
This upgraded growth projection is likely a boost for UK Chancellor Rachel Reeves, who has faced increasing pressure to address the country’s economic stagnation. Reeves has acknowledged the government’s need to implement more measures to stimulate economic growth and improve living standards.
In response to the IMF’s report, Reeves emphasized that the UK remains the only G7 country, besides the US, to have its growth forecast upgraded for 2025, highlighting the resilience of the UK economy in challenging times.
While economic forecasts are subject to many unpredictable factors, including geopolitical tensions and environmental events, the IMF’s report signals a cautiously optimistic outlook for the UK, despite potential risks stemming from Trump’s policies.
