Through the branches of the trees in Ruskin Park, the illuminated verandas of the period terraced houses can be seen and in the distance the growing housing development at Nine Elms on May 14, 2024 in London, England.
Richard Baker | In pictures |
LONDON – The International Monetary Fund on Tuesday raised its growth forecast for Britain through 2024 from 0.5% to 0.7%, giving the country's new government further momentum.
Looking ahead, the Washington, DC-based IMF reiterated its forecast in the July version of its World Economic Outlook that the UK will grow by 1.5 percent in 2025.
The upgrades come after two years of stagnation, with the UK entering a mild recession in the second half of 2023. However, GDP growth in May was above analysts' expectations at 0.4%, and summer events such as the 2024 European Football Championship and even Taylor Swift's Eras Tour are expected to boost economic activity.
At the beginning of the month, investment bank Goldman Sachs raised its forecast for the British economy in 2025 by 0.1 percentage points to 1.6 percent. It cited the budget plans of the new Labour government under Prime Minister Keir Starmer, which include planning reform and closer trade relations with the European Union.
Deutsche Bank and Goldman brightened their outlook for Great Britain on Friday. In a statement, the economists said they now expect gross domestic product to grow by 1.2 percent this year, which is significantly higher than their previous forecast of 0.8 percent.
The country's GDP in May showed the strength of the professional services and construction sectors, Deutsche Bank said, adding that the European Championships are expected to provide a further boost to the hospitality and leisure sectors.
Meanwhile, analysts at Jefferies said in a recent note that the size of the Labour Party's parliamentary majority makes Britain appear “relatively stable” and that this, combined with regulatory reform, could increase the attractiveness of assets in the country.
This comes as the Bank of England is expected to begin cutting interest rates in the coming months. British inflation hit the central bank's target of two percent in May and economists polled by Reuters expect it to fall further to 1.9 percent in Wednesday's reading.
Other economies for which the IMF on Tuesday raised its growth forecast for 2024 included the eurozone (by 0.1 percentage points to 0.9 percent), Spain (by 0.5 percentage points to 2.4 percent) and China (by 0.4 percentage points to 5 percent).
It lowered its forecast for the US economy by 0.1 percentage points to 2.6%.
The organization expects global growth of 3.2 percent this year and said global activity and trade were more stable, particularly due to strong exports from Asia.
However, there were also warnings that the services sector was slowing down the inflation process as a whole, making monetary policy decisions more difficult.
“Upside risks to inflation have thus increased, raising the prospect of even more prolonged higher interest rates in the context of escalating trade tensions and heightened political uncertainty,” the IMF’s World Economic Outlook said.
— CNBC's Sophie Kiderlin and Vicky McKeever contributed.
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