IMF Lifts UK Growth Outlook; an Early Boost for New Labour Government

• The International Monetary Fund (IMF) has upgraded its forecast for UK economic growth this year in an early boost for the new Labour government.
• In an update to its global growth outlook, the IMF raised the UK to 0.7% from the 0.5% forecast in April, taking it from the second bottom ahead of Germany in 2023 to a pace equal to Italy and Japan. The US, Canada and France will see more rapid expansions.
• The 0.2 percentage point upgrade was the equal largest alongside France. The forecast was unchanged for 2025, when the UK will be the third-fastest growing G-7 economy at 1.5%, behind Canada and the US, according to the IMF
• Despite the better outlook, the forecasts imply the newly appointed  Chancellor of the Exchequer Rachel Reeves still faces trouble in her first budget – expected in September or October. The Chancellor of the Exchequer is the UK government's chief financial minister responsible for raising revenue through taxation or borrowing and for controlling public spending.
• The Office for Budget Responsibility, the fiscal watchdog, was forecasting growth this year of 0.8% and 1.9% in 2025 and most economists think its long-term outlook is overly ambitious.
• “Further challenges to disinflation in advanced economies could force central banks, including the Federal Reserve, to keep borrowing costs higher for even longer. That would put overall growth at risk,” Pierre-Olivier Gourinchas, the IMF’s economic counsellor, wrote in a blog accompanying the forecasts.
• Last week, 3 of the 9 members of the BOE’s Monetary Policy Committee expressed similar concerns about services prices and wages. However, they were countered by another external member already voting for a rate cut, who said this week that the BOE’s policy was too tight.

(Source: Reuters)