By Suban Abdulla
LONDON (Reuters) – Britain will have the fastest growth among major European economies this year, according to the International Monetary Fund, a boost to Finance Minister Rachel Reeves, who has been under pressure for a slowdown since her party came to power in July.
The IMF on Friday raised its forecast for UK growth in 2025 by 0.1 percentage point to 1.6%, making it the third-strongest among the Group of Seven advanced economies after the United States and Canada.
The IMF’s outlook for UK gross domestic product growth in 2026 remained at 1.5%, again the third fastest in the G7 and unchanged from its October estimate.
Responding to the 2025 upgrade, Reeves said she would “go further and faster” to deliver economic growth.
The Bank of England forecasts growth of 1.5% in 2025, partly reflecting a short-term boost to the economy from the temporary increase in public spending announced by Reeves on 30 October.
Last month, the Organization for Economic Co-operation and Development also raised its forecast for UK economic growth to 1.7 percent from the previous 1.2 percent.
However, Reeves’ spending plans are based on forecasts from the government’s Office for Budget Responsibility, which pegged growth at 2% in 2025 and 1.8% in 2026.
The cost of 30-year British government borrowing hit its highest level since 1998 on Monday – the biggest losers in a global bond sell-off fueled by concerns about higher inflation and borrowing under Donald Trump’s impending presidency.
But UK bond prices rebounded later in the week after weaker-than-expected UK and US inflation data and slower-than-expected GDP growth in November, the first month after Reeves presented her budget plan.
Reeves – whose future has been questioned by opposition MPs – on Friday doubled down on her budget decisions, saying they were made in the national interest to get public finances back on a “solid footing”.
Britain’s economy stagnated in the third quarter of 2024 as uncertainty over the Labor government’s budget hit businesses, with the BoE estimating that growth was zero in the final quarter of 2024 as well.
