The International Monetary Fund (IMF) has upgraded its forecast for the UK’s growth this year but warned the Iran war could hit the economy.

The growth estimate has been upgraded to 1% from 0.8% for 2026 by the IMF.

It said inflation would increase ‘temporarily’ due to higher energy prices. As the UK imports more energy than it produces domestically, it is more sensitive to rapid rises in global prices.

But the IMF suggested the Bank of England does not need to raise interest rates, which are currently at 3.75%, this year in response.

Chancellor of the Exchequer, Rachel Reeves, said: 

‘The IMF upgrading its growth forecasts and backing our fiscal strategy is yet more proof that this government has the right economic plan.

‘The choices I have made as Chancellor mean our economy is in a stronger position as we deal with the costs of the war in Iran. Putting our stability at risk when signs of progress are emerging would leave families and businesses worse off.  

‘Instead, this government is getting on with the job of building an economy that is stronger, more resilient, and prepared for the future.’

Internet link: IMF website HM Treasury press release