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IMF UK Growth Downgrade
The IMF downgraded the UK's growth forecast to 0.8%, the largest cut among the G7.
“The energy shock from the Iran war will hit the UK the hardest of the world's advanced economies”
The downgrade was attributed primarily to the economic fallout from the Iran war.
The UK is forecast to have the joint highest inflation in the G7 at 3.2%.
Unemployment is expected to rise to 5.6% from 4.9% last year.
Chancellor Rachel Reeves acknowledged the war will come at a cost to the UK.
The shadow chancellor blamed Reeves for the size of the downgrade.
Energy Prices and Inflation
The IMF warned the Iran war could trigger the largest energy crisis in modern times.
The UK remains sensitive to rapid rises in energy prices.
Cornwall Insight expects the typical energy bill to reach £1,861 in July.
The IMF cautioned central banks against raising interest rates too prematurely.
Untargeted fiscal support measures are frequently poorly designed and costly.
Global Growth and Recession Risks
The IMF cut its global growth forecast to 3.1% for 2026.
“The global economy is threatened with being thrown off course”
A severe scenario could collapse global growth to about 2%.
Inflation would exceed 6% in such a scenario.
The global economy is threatened with being thrown off course by the war.
The IMF set out three possible scenarios for the war.
The Bank of England's Andrew Bailey and Chancellor Reeves were in Washington.
Political Reactions and Policy Challenges
Chancellor Reeves said the war will come at a cost to the UK.
The shadow chancellor blamed Reeves for the size of the downgrade.
Liberal Democrat Treasury spokesperson called the downgrade an indictment of Trump's idiotic war.
The IMF cautioned that the UK had much less room to move now.
Any support measures should stay within current government spending.