Panoramic view of the London city skyline in the capital’s financial district, October.
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LONDON – The International Monetary Fund on Tuesday upgraded Britain’s growth outlook for 2024, saying lower interest rates and inflation will boost domestic demand.
The International Monetary Fund now expects the UK economy to grow by 1.1% this year, up from the 0.7% forecast in July. The agency also reiterated its forecast for economic growth of 1.5% in 2025.
UK inflation was 1.7% in September, down from 11.1% in October 2022. Falling services sector inflation and wage growth led economists last week to The pace of interest rate cuts is expected to accelerate The Bank of England predicts that by the end of 2024, the central bank will raise the key interest rate to 4.5% from 5.25% at the beginning of the year.
Economic growth has been tepid so far this year; Growth of 0.2% in August After being flat in June and July.
The brighter outlook for the IMF comes as Britain prepares for centre-left Labor to present its first budget in 14 years this month. Prime Minister Keir Starmer warned that the plan would contain “tough” decisions to fill what he said was a looming £22 billion ($28.5 billion) financing gap – a figure that was criticized by his Conservative predecessor. Controversy – after Labor pledged to slash net borrowing.
While Starmer has ruled out the possibility of increasing some major taxes, including income tax and corporate tax, a wider package of tax rises is also expected. Budget uncertainty weighed on consumer confidence in August, although S&P Global UK Consumer Confidence Index Data released on Monday showed households were slightly more optimistic about their financial situation and more willing to make larger purchases.
“The International Monetary Fund has upgraded our growth forecast for this year, which is welcome, but I know there is more work to do,” Finance Minister Rachel Reeves, who took office in July, said on Tuesday express. Labor has previously pledged to ensure the highest sustained growth from the G7 and to make higher growth a core focus of its policymaking.
On Tuesday, the International Monetary Fund also lowered its 2024 growth forecast for the euro zone to 0.8% from the previous 0.9%, predicting that Germany, the euro zone’s largest economy, will stagnate. Analysts pointed out that the German economy faces many challenges, including fierce competition for the country’s economy. car and broader manufacturing products, as well as rising energy prices and macro uncertainty Put pressure on its industrial production.
Among other so-called “advanced economies,” the International Monetary Fund predicts that the U.S. economy will grow by 2.8%, Canada by 1.3%, and Japan by just 0.3%. Demand is weak this year under conditions of high inflation.
