London Daily

Focus on the big picture.
Friday, May 09, 2025

UK economy to avoid recession but inflation still a worry, IMF says

UK economy to avoid recession but inflation still a worry, IMF says

The British economy will avoid falling into recession this year, according to upgraded growth forecasts Tuesday from the International Monetary Fund.
In its latest assessment of the UK economy, the Washington-based fund said domestic demand had proven more resilient than anticipated in the face of the surge in energy costs.

The IMF now thinks the British economy will grow by a still-modest 0.4 percent this year partly as a result of higher wages, up from its previous prediction just a month ago of a 0.3 percent decline. The more positive projection came alongside warnings of a “subdued” outlook for growth and the threat posed by ongoing global uncertainty.

IMF Managing Director Kristalina Georgieva said at a press briefing in London that the latest assessment reflects “favorably” on the UK in comparison to other countries in the Group of Seven leading industrial nations.

“We are likely to see the UK performing better than Germany, for example,” she said.

Despite the more upbeat assessment, the IMF said inflation is likely to remain stubbornly high over the coming years and only return to the Bank of England’s target of 2 percent in mid-2025, six months longer than it predicted earlier this year.

Like other central banks, the Bank of England has been raising interest rates aggressively over the past 18 months or so to a 15-year high of 4.5 percent after inflation spiked sharply, first because of bottlenecks caused by the coronavirus pandemic and then Russia’s invasion of Ukraine, which sent energy and food prices surging.

Figures on Wednesday are expected to show inflation in Britain falling back below 10 percent for the first time since August, largely because the sharp spike in prices caused by the invasion of Ukraine will fall out of the annual comparison.

Andrew Bailey, governor of the Bank of England, told lawmakers on Tuesday that inflation had “turned the corner.”

The IMF also praised the British government for reestablishing credibility following the “stress episode” of last September’s big tax cuts of the short-lived government of former Prime Minister Liz Truss.

That mini-budget led to a sharp increase in borrowing costs and fears about the viability of some pension funds as financial markets questioned the government’s unfunded tax cuts.

Truss’ premiership soon came to an end and the Conservative Party promoted Rishi Sunak to take the helm. He and his Treasury chief, Jeremy Hunt, made it their priority to restore faith in Britain’s finances by reversing those tax cuts and tightening spending.

Hunt said the IMF report vindicated the government’s efforts to “restore stability” but that the “job is not done yet.”

With a general election set to take place next year and the Conservatives trailing heavily in the opinion polls, the pressure is mounting on Sunak to cut taxes, a course that IMF cautioned against taking.

“Of course, it is attractive to look into ways in which the tax burden is lighter, to inject more investment opportunity,” Georgieva said. “But only when it is affordable — and at this point of time, neither it is affordable nor it is desirable.”
Newsletter

Related Articles

0:00
0:00
Close
Historic Papal Conclave Set to Commence in Rome
Huge Copper, Gold, and Silver Discovery in Argentina and Chile — But the Profits Go Abroad
Prince Harry is pleading for reconciliation — but the royals are just as sick of his victimhood as everyone else
The Road to Freedom: She Protested Putin, Escaped House Arrest, and Survived a 2,800-Kilometer Journey
OpenAI's Flip-Flop: No Longer Going Commercial, Back to Nonprofit, After Musk Lawsuit and Backlash
“Trump Supporter” Aims to Bring a MAGA-Style Shift to Romania
First From China: Zhao Xintong Wins the Snooker World Championship
Nvidia Faces Billion-Dollar Losses – Warns: China Is on Its Way to Becoming an AI Superpower
Trump Rules Out Third Term, Names JD Vance and Marco Rubio as Potential Successors
Mexico Says ‘No’ to U.S. Troops: President Sheinbaum Rejects Trump’s Offer to Fight Cartels
Nigel Farage’s Reform UK Storms the Map, Wrecking the Two-Party Monopoly
DOGE: Reimagining Government Operations with AI
Common Sense Returns to Britain's Legal System: UK Supreme Court Declares a Woman Is… a Woman
Beijing Says U.S. Is ‘Reaching Out’ for Tariff Talks Amid Soaring Trade Tensions
U.K. Court Rejects Prince Harry’s Final Appeal Over Police Security
Prince Harry’s Heartfelt Outburst Rocks the Royal Family
Trump Shares AI-Generated Image of Himself as… Pope, Prompting Outrage Reaction
Transgender Swimmer Secures Five Gold Medals at U.S. Masters Championship
Prince Harry: “I Want Reconciliation with My Family”
Germany's Alternative für Deutschland (AfD) party has now been officially labeled “right-wing extremist” by the federal office for the so-called “protection of the constitution.”
Amazon Launches Satellite Internet Service Amidst Competition with SpaceX
Transformative Changes in Women's Wrestling: The Rise of WWE Superstars
The Rush to the White Gold: Global Investment Surge in Natural Hydrogen Exploration
This is a day in Spain without electricity and internet
Reform UK Surprises in British Elections, Challenging Traditional Two-Party System
180-Year-Old Christian University in South Carolina Announces Closure Due to Unmet $6 Million Fundraising Goal
Brazilian Woman Jailed for Fourteen Years for Writing “You Lost, Idiot” on Statue During Protest
Trump Administration Removes National Security Adviser Mike Waltz Amid Signal Chat Controversy
Dutch Politician Eva Vlaardingerbroek Receives Spyware Threat Alert from Apple
Paramount Board Considers Settlement in Trump’s $20 Billion Lawsuit Over "60 Minutes" Interview
U.S. Economy Shrink in Trump’s First Quarter as Tariff Policy Raises Questions
Deadline Looms for RTS Meter Replacement: Hundreds of Thousands at Risk of Heating Disruption
Sweden Grapples with Deadly Gun Violence: Suspect Arrested After Three Young Men Killed in Uppsala Hair Salon
Walz Reveals Why Harris Chose Him as Her Running Mate and Reflects on Democratic Losses
Spain Restores Power After Unprecedented Nationwide Blackout
Carney Secures Liberal Mandate in Canada’s Federal Election
Death Penalty Sought as Luigi Manion Pleads Not Guilty in CEO Murder Case
President Trump contacts Jeff Bezos after reports of Amazon considering listing tariff surcharges; company clarifies no such plan for main platform
Spain and Portugal Recover from Massive Blackout
Liverpool Clinches Record-Equalling 20th English League Title Under Arne Slot
Singapore Politicians Warn Against Foreign Interference in Election
Driver Ploughs into Vancouver Festival Crowd, Killing Nine
Depression, Fear of Defamation, and a Tragic End: New Details on Virginia Giuffre’s Suicide
“Sharia for UK, Allah Akbar!”
Massive Explosion at Iran's Bandar Abbas Port Linked to Suspicious Chemical Shipments
Incident Reflection: A Harsh Reality Check
Pakistani migrants to Danish man: “ “We have 5 children while you have 1 or 2. In 10 years, there will be more Pakistanis than Danes here.“
Clashes Erupt in London as Tensions Rise Between Indian and Pakistani Communities
Specialized anti-drone weapons deployed among security personnel Ahead of Papal Funeral
How do you fix this culture?
×