The International Monetary Fund (IMF) has upgraded its growth forecast for the UK in its latest report on the global economic outlook.
As reported by the BBC, the organisation has said it expects the UK economy to “accelerate” over the rest of the year. The figure, which was revised up to 1.1% from a previous forecast of 0.7%, would put it around the middle of the global table of growth among countries.
US up, EU down
Global growth, meanwhile, is “expected to remain stable yet underwhelming”, the IMF states, proving “virtually unchanged” from predictions the organisation made earlier this year. This does include revisions “beneath the surface”, however, most notably an upgrade to the US forecast.
The report predicts that Germany will achieve 0.0% growth, dragging down the overall eurozone rate, though it expects Spain to achieve particularly strong growth of 2.9% in 2024 and 2.1% in 2025. The US is expected to grow by 2.8% this year and 2.2% in 2025.
Tariff threat
The report emphasises that, while it expects the world economy to grow 3.2% this year and in 2025, as much as 0.8% of next year’s figure could be wiped out should higher tariffs be imposed on a “sizeable swathe” of world trade.
Republican US presidential candidate Donald Trump has proposed 20% tariffs on all imports to the country, as well as a 60% tariff on Chinese goods. Democratic candidate Kamala Harris, meanwhile, has expressed support for higher tariffs on some Chinese imports.
Pierre-Olivier Gourinchas, the IMF’s top economist, told the FT on rising trade barriers:
“It’s a policy that is harming basically everyone. It’s harming the rest of the world. It’s harming the US.”
Tariff war?
IMF economists modelled the consequences of a trade war between the US, Eurozone and China in the event that Trump’s proposed tariffs were implemented, examining the potential result of 10% import tariffs across all three markets.
According to this model, which also assumed a 10-year extension to tax cuts implemented by Trump in 2017 and higher costs of borrowing, US GDP would be 1% lower than the IMF baseline for 2025.
This scenario “may not be the worst”, Gourinchas added, “because we’re assuming that it stops after one round” of tariffs. If retaliation between the world’s markets continued, central banks could face pressure over both low growth and inflation as a result of more expensive imported goods.
Russia boost
Despite heavy sanctions following its invasion of Ukraine, Russia has received another upgrade to its growth forecast as the economy retools for war, revised up to 3.6% for 2024.
This boost is expected to be short-lived, however, with a fall expected to 1.3% in 2025 as private consumption and investment take a hit.
Emerging markets’ economies have also been affected by disruption, the report notes:
“Disruptions to production and shipping of commodities—especially oil—conflicts, civil unrest, and extreme weather events have led to downward revisions to the outlook for the Middle East and Central Asia and that for sub-Saharan Africa.”
It comes as members of the BRICS group of nations meet in Russia for discussions, the Guardian reports. Iranian president Masoud Pezeshkian said the bloc “can be a solution to deal with the dominance of the dollar and deal with the economic sanctions of countries”.