The IMF has downgraded the UK’s growth forecast to 0.8% – the biggest drop of any G7 nation
The organisation said the UK is particularly exposed as a net energy-importing economy, meaning the effects of the Iran war weigh more heavily on growth
Inflation will also rise to 3.2% and unemployment will hit 5.6% according to forecasts
Germany was next worst affected, with a 0.6 percentage point downgrade across the two years.
Across the world economy as a whole,Growth is projected to slow to 3.1% in 2026. Inflation is set to rise to 4.4% before easing to 3.7% in 2027—a 0.6 percentage point upward revision relative to January, driven by higher commodity prices.
It also warned of the growing risk of “substantial” food price increases as fertiliser shortages hit farmers before the crucial spring planting season.
The IMF said the global economy now faces a major test as a result of the ongoing war in the Middle East, having weathered the trade and tariff upheaval last year. It warned that a protracted conflict could further worsen the outlook, while growing public debt and eroding institutions’ credibility risks further damage.
“A longer or broader conflict, worsening geopolitical fragmentation, a reassessment of expectations surrounding artificial‑intelligence‑driven productivity, or renewed trade tensions could significantly weaken growth and destabilize financial markets,” the IMF said.
“Fostering adaptability, maintaining credible policy frameworks, and reinforcing international cooperation are essential to navigating the current shock while preparing for future disruptions in an increasingly uncertain global environment.”
Pierre-Olivier Gourinchas, the Fund’s chief economist, blamed Britain’s downgrade on its reliance on gas imports, a lack of storage as well as weak growth at the end of last year
