UK growth forecast upgraded but higher energy prices to hit economy next year

The International Monetary Fund has upgraded its forecast for UK economic growth this year, but expects the outlook to weaken in 2027 as higher energy prices and interest rates affect the economy.

Stronger growth expected this year

The IMF said the UK economy is set to expand by more than previously expected during the current year. The revised outlook points to a better near-term performance than the organisation had earlier forecast.

However, the improved projection is not expected to carry through unchanged. The IMF identified higher energy prices and interest rates as factors that will hit the UK economy in 2027.

Pressure expected in 2027

The forecast highlights a shift in the UK’s economic outlook. While growth has been upgraded for this year, the expected impact of energy costs and borrowing conditions underlines the risks facing the economy later in the forecast period.

The IMF’s assessment provides a mixed picture: stronger-than-expected growth in the near term, followed by pressure from higher energy prices and interest rates in 2027. The organisation did not provide a specific growth figure in the information available.

Outlook

For now, the IMF expects the UK economy to perform better this year than previously projected. Its warning about 2027 indicates that the effect of energy prices and interest rates will remain central to the UK’s economic outlook.