IMF Upgrades UK Growth Forecast as Iran-War Fears Ease

On 8 July 2026 the International Monetary Fund (IMF) released its July update of the World Economic Outlook and raised its 2026 growth projection for the United Kingdom to 1 percent of gross domestic product, a 0.2-percentage-point increase from the April forecast. The upgrade makes the UK the only G7 economy with a higher forecast for the year, positioning it third-fastest among the group after the United States (2.3 %) and Canada (1.1 %).

The Guardian

The IMF noted that the global economic impact of the war in Iran has been “better than feared,” attributing the modest slowdown to offsetting demand-driven momentum in the technology cycle, especially advances in artificial intelligence (AI). Nonetheless, the Fund warned that a “renewed conflict would propagate through a further increase in commodity prices and extended volatility, supply shortages, and exchange rate pressures.” Energy-importing countries that are not part of technology supply chains have been hit hardest, with retail gasoline up 30 % in Asia and LNG prices rising 50 % in the same region.

The Guardian

• UK GDP growth 2026: 1 % (up from 0.8 % in April).

The Guardian

• UK GDP growth 2027: unchanged at 1.3 %.

The Guardian

• UK inflation: 2.8 % in May 2026; projected to return to the 2 % target by mid-2027.

The Independent

• Global inflation 2026: 4.7 % (up from 4.1 % in 2025); 2027 forecast 3.9 %.

The Independent

• Global real GDP growth 2026: 3 % (down from 3.1 % in the prior forecast); 2027 forecast 3.4 %.

The Guardian

Chancellor Rachel Reeves welcomed the upgrade, stating that it “shows we have the right economic plan to build a stronger and more secure economy.” She added that the UK’s “choices mean the economy is in a better position to deal with the costs of the war in Iran while kickstarting long-term growth by focusing on our three big choices – boosting AI, regional growth and strengthening trade with the EU.” The IMF’s report emphasized that while the outlook is “more balanced than in April, risks remain tilted to the downside,” highlighting the potential for renewed Middle-East conflict to destabilise commodity markets and financial conditions. Incoming Prime Minister Andy Burnham, slated to assume office on 17 July, has not yet disclosed his fiscal team or detailed policy responses.

The IndependentThe Guardian

• “open image in gallery Chancellor Rachel Reeves said: ‘The UK is the only G7 country where the growth forecast this year has been upgraded by the IMF’ ( PA ) In its report, the IMF said: “The global economy as a whole has, so far, weathered the shock from the war better than feared.” — IMF World Economic Outlook

The Independent

• “The modest slowdown reflects the effects of the war in the Middle East being partly offset by accelerated demand-driven momentum in the global technology cycle, thanks to advances in artificial intelligence (AI) and its adoption,” — IMF World Economic Outlook

The Guardian

• “renewed conflict would propagate through a further increase in commodity prices and extended volatility, supply shortages, and exchange rate pressures” — IMF World Economic Outlook

The Guardian

• “Chancellor Rachel Reeves said: “The UK is the only G7 country where the growth forecast this year has been upgraded by the IMF.” — Rachel Reeves, Chancellor

The Independent

• “Our choices mean the economy is in a better position to deal with the costs of the war in Iran while kickstarting long-term growth by focusing on our three big choices – boosting AI, regional growth and strengthening trade with the EU.” — Rachel Reeves, Chancellor

The Guardian