The International Monetary Fund has “significantly” lowered the UK’s growth to 1.1% this year, but Thinktank added that there is room for further tax cuts this year.
The Washington-based agency said its latest forecast was 0.5% lower than its January forecast, which came after tariff disruptions.
The UK is one of four “significant downward revisions” among developed countries in its last world economic outlook report earlier this year. Canada, Japan and the United States are other countries.
Thinktank blames: “The impact of recent tariff announcements, the increase in gilding output and weaker private consumption due to the regulation of prices and energy costs.”
The UK is expected to grow by 1.4% next year, down 0.1% from January.
Inflation will peak at 3.1% this year, up 0.7% from the human body’s forecast at the beginning of the year and drop to 2.2% in 2026.
The agency said the rise in cost of living “mainly reflects the price changes in one-time regulation.”
Unemployment will remain stable at 4.5 million and 4.4 million over the two-year period.
But the Bank of England’s range can also reduce interest rates to three-quarters this year, with the current 4.5 per cent besides a one-quarter cut in February, according to Pierre-Olivier Gourinchas, chief economist at the International Monetary Fund.
By comparison, the United States has dropped the U.S. to 0.9% to 1.8% this year, and is expected to grow by 1.7% and fall by 0.4% in 2026.
“In the U.S., consumer, business and investor sentiment was optimistic at the beginning of the year, but has recently turned into a more pessimistic stance as uncertainty has continued and new tariffs have been announced,” the agency said.
Earlier this month, the U.S. imposed 10% baseline tariffs in 75 countries, including the UK. Although the United States attacked China with 145% import fees, Beijing imposed 125% tariffs on U.S. goods.
The world economy is expected to grow 1.4% this year, down 0.5% in 2026, 0.3% lower than the outlook for the human body in January.
Prime Minister Rachel Reeves traveled to the United States to hold her first face-to-face meeting with U.S. Treasury Secretary Scott Bessent to hold trade talks to ease the 10% tariff imposed by the United States on the UK.
Reeves said: “The IMF has realized that the government is reforming through our change plan, which will drive long-term growth in the UK.
“The report also makes it clear that the world has changed, which is why I will defend British interests in Washington this week and defend free fair trade.”
