IMF lifts UK 2026 growth forecast to 1.3%

By Daniel Okafor

The IMF has raised its forecast for UK GDP growth in 2026 to 1.3%, while warning that growth is likely to edge down the following year. The upgrade landed a little more than a fortnight before Chancellor John Healey delivers his first budget.

Alongside the number came a direct message. Silvana Tenreyro, the IMF's economic counsellor and top economist, said Healey should "stay the course" and continue repairing the UK's public finances.

Tenreyro also offered a comparative judgment. She said the UK "stands out" among G7 countries in having a plan to narrow its deficit, according to the fund's comments reported on October 13.

What does the upgrade actually say?

The headline figure is 1.3% growth for 2026. That is the IMF's revised projection in its World Economic Outlook. The fund simultaneously flagged a softening trajectory: growth is likely to edge down in 2027.

So the upgrade is real but conditional. The fund sees a stronger near term and a weaker medium term. That shape matters for a chancellor writing his first budget under tight fiscal constraints.

The timeline is short. Healey's budget arrives in under three weeks from the IMF's announcement. The fund's endorsement of his fiscal direction gives him external cover, but the forecast of slower growth next year limits how much headroom he can claim.

Why does the G7 comparison matter?

Tenreyro's point about the deficit plan is the sharper half of the story. Among the world's seven largest advanced economies, the UK is the one with a credible, articulated path to narrow its deficit, she said.

That is a comparative grade, not an absolute one. A plan to narrow a deficit is not the same as a closed deficit. The remark frames Britain as the disciplined outlier in a group where most members lack an equivalent framework.

For markets and rating agencies, the G7 distinction carries more weight than a 0.1-percentage-point forecast tweak. It signals that the IMF views the UK's fiscal strategy as structurally distinguishable, not merely tolerable.

What is the global backdrop?

The fund paired its UK upgrade with a sterner warning about the wider economy. In the same World Economic Outlook published on October 13, the IMF cautioned that the global economy "could soon test the limits of resilience."

That framing sets the context for the UK numbers. The IMF is upgrading Britain while telling the rest of the world that the current run of endurance may be nearing its end. A small economy-specific upgrade inside a global caution signal reads as relative strength, not broad optimism.

For Healey, the message cuts both ways. The UK's plan earns praise precisely because the global environment is deteriorating. Deficit repair looks more valuable when resilience is running out.

What does this mean for the budget?

Tenreyro's "stay the course" instruction is the operative guidance. It tells the chancellor to keep repairing the public finances rather than loosen the reins in response to an upgraded forecast.

The economics are straightforward. A 1.3% growth rate for 2026 improves the revenue base slightly. An expected slowdown in 2027 does the opposite. A chancellor who banks the first and ignores the second risks borrowing against a weaker year.

The IMF has effectively pre-endorsed fiscal discipline and pre-warned against a giveaway. Healey's first budget, due within a fortnight, now carries an external benchmark: the fund will judge whether he stayed on the path it just praised.

The stakes extend past one fiscal event. If the 2027 slowdown arrives as forecast, the UK's standing as the G7's deficit-planner will face its first real stress test — and the IMF's upgraded 1.3% will mark the high point, not the trend.