The UK economy's gross domestic product (GDP) growth forecast has been slashed amid ongoing market turmoil in the International Monetary Fund's latest forecast.
This comes as blow to Prime Minister Keir Starmer and Chancellor Rachel Reeves, who have made economic growth a cornerstone of the Labour Government's mission statement.
GDP growth is expected to jump by 1.1 per cent in 2025 compared to earlier projections of 1.6 per cent in the wake of President Donald Trump's tariff threats.
Furthermore, growth in the economy is now forecast to increase by 1.4 per cent in 2026, revised down from earlier projections of 1.5 per cent.
The IMF has published its latest economic growth forecast in a worrying sign for the UK
GETTY
In the IMF's report, US tariffs were cited as the primary factor in disrupting global trade disruption and leading to "unprecedented uncertainty".
As a result of this, global GDP growth is being cut by 0.5 percentage points in 2025 with nearly nations set to experience a downgrade.
According to the World Economic Outlook report, these estimates have been drawn up under “exceptional circumstances”, with the IMF being forced to change its projections after President Donald Trump launched a range of new and higher tariffs earlier this month.
The IMF’s top economist, Pierre-Olivier Gourinchas, said: “While many of the scheduled tariff increases are on hold for now, the combination of measures and countermeasures has hiked US and global tariff rates to centennial highs.
Breakdown of how the IMF's latest GDP forecasts for the global economy
“For this reason, we expect that the sharp increase on April 2 in both tariffs and uncertainty will lead to a significant slowdown in global growth in the near term.”
Global growth is projected to slip from 3.3 per cent in 2024 to 2.8 per cent in 2025, before jumping back up to three per cent in 2026
Britain's economy is predicted to grow by 1.1 per cent in 2025, 0.5 percentage points less than January’s forecast, partly reflecting tariffs.
However, this is also due to weaker consumer behaviour amid higher inflation driven by bills and energy price hikes.
It should be noted that UK GDP growth will be stronger in the UK than Germany, which is predicted to flatline, France, and Italy.
Furthermore , inflation forecasts have been revised upwards for advanced economies since January, with the UK and the US being hit hardest.
LATEST DEVELOPMENTS:
Global markets plunged earlier this month after President Donald Trump unveiled his tariff onslaughtREUTERSInflation in the UK is now likely to be 0.7 percentage points higher this year, compared with the previous forecast, at 3.1 per cent.
This figure is primarily due to prices like water and electricity rising from April.
Chancellor Rachel Reeves said the new forecasts show “the UK is still the fastest-growing” European country in the G7.
“The IMF have recognised that this Government is delivering reform which will drive up long-term growth in the UK, through our Plan for Change,” she said.
"The report also clearly shows that the world has changed, which is why I will be in Washington this week defending British interests and making the case for free and fair trade."
Most read
More
