May 27, 2025
The International Monetary Fund (IMF) has released its preliminary findings following the 2025 Article IV Mission to the United Kingdom. This mission is part of the regular consultations under Article IV of the IMF's Articles of Agreement. The statement outlines various aspects of the UK's economic situation, including growth forecasts, fiscal policy, monetary policy, financial sector policies, and structural reforms.
According to the IMF staff's assessment, after a slowdown in late 2024, the UK economy is on a recovery path. Growth projections stand at 1.2% for 2025 and 1.4% for 2026. This recovery is attributed to factors such as monetary easing and increased public spending from the October budget. However, global trade tensions are expected to reduce UK GDP by 0.3% by 2026.
Fiscal strategy for the next five years aims to support growth while maintaining fiscal sustainability. "The new spending plans are credible and growth-friendly," stated IMF staff, acknowledging pressures on public services and investment needs. Deficits are projected to decline as revenue increases.
The report suggests that medium-term fiscal deficits should be reduced as planned despite potential risks from global uncertainty and volatile market conditions. In case these risks materialize, additional revenue or expenditure measures may be needed.
In terms of monetary policy, a gradual approach continues to be appropriate amidst inflationary risks. The Bank of England's (BoE) flexible pace in easing monetary policy is considered suitable given elevated uncertainty levels.
Financial sector resilience remains strong despite increasing global financial stability risks over the past year. "The banking system is adequately capitalized and liquid with healthy levels of profitability," according to IMF staff.
Structural policies focus on addressing weak productivity which remains a significant obstacle for lifting growth and living standards in the UK economy post-Global Financial Crisis (GFC). The authorities' Growth Mission emphasizes critical areas like planning reform and infrastructure projects aimed at boosting private investment alongside enhancing workforce skills.
Finally, industrial policy can complement these efforts but broader economy-wide reforms should remain central tools for boosting competitiveness according to IMF recommendations.
The concluding statement thanks all counterparts involved in discussions for their open dialogue during this mission period.