(MENAFN) The United Kingdom is projected to be the second-fastest-growing economy among the G7 nations this year, according to the latest forecasts from the International Monetary Fund (IMF).

Despite the growth outlook, the IMF predicts the UK will experience the highest inflation rate in the G7 for both 2025 and 2026, driven largely by rising energy and utility costs. The projections were released as part of the IMF’s biannual global economic report, which also noted that recent US import tariffs have had a limited but noticeable effect on global growth.

The Fund highlighted that the UK appears to be navigating current economic challenges better than most G7 countries, except for the United States. Nonetheless, growth remains modest, with the UK expected to expand by 1.3% this year and next. On a per capita basis, output is forecast to rise only 0.4% in 2025 and 0.5% in 2026, placing the UK at the bottom of the G7 league table for per-head growth.

Chancellor Rachel Reeves, attending the IMF gathering in Washington, acknowledged public frustration over sluggish growth, saying the economy “feels stuck” to ordinary people and experts alike. She aims to use the meeting to reassure markets about the UK’s financial stability and to promote the country as a destination for investment.

The IMF also cautioned that inflation remains a concern, with consumer prices expected to rise 3.4% this year and 2.5% in 2026. However, the Fund projected that inflation would gradually decline to 2% by the end of next year. Bank of England Governor Andrew Bailey echoed this view, citing easing inflationary pressures after recent data showed rising unemployment and slowing wage growth.

Shadow Chancellor Sir Mel Stride criticized the outlook, describing it as “grim reading” for UK households, who he said are “being squeezed from all sides.” He blamed the current Labour government for rising living costs, growing public debt, and declining business confidence.

MENAFN15102025000045017640ID1110199120