The UK is predicted to be the second fastest-growing economy among the G7 nations this year, according to experts at the International Monetary Fund (IMF).
But the forecast also indicates the UK will endure the highest inflation among the group - both this year and the next - largely driven by rising energy and utility bills, the BBC reports.
As part of the twice annually-published data, the IMF predicts that only the US economy will outperform the UK's among the G7 in 2025.
In 2026 it is expected to slip to third.
Professor Joe Nellis, economic adviser at accountancy and advisory firm MHA
Reacting to the predictions, Professor Joe Nellis, economic adviser at accountancy and advisory firm MHA, said: "The latest IMF World Economic Outlook suggests the UK is edging slowly towards recovery, but warns the path to stability remains narrow. Growth is projected at around 1.3% in 2025, remaining at 1.3% for 2026, as household spending and government investment spending lend support to economic activity.
"Global trade frictions, rising borrowing costs, and weak productivity continue to cloud the outlook for the UK economy, but this does not make the UK an outlier — global growth is forecast to slowly decline from 3.3% in 2024, to 3.2% in 2025 and 3.1% in 2026. In this context, the UK would be the second fastest-growing economy in the G7, behind the USA.
"The inflation picture is less positive, as the UK is projected to have the highest annual average inflation in the G7 economies in 2025 and 2026, at 3.4% and 2.5% respectively, and is expected to remain well above target for several more quarters. That persistence limits the Bank of England’s room to cut interest rates further and complicates the Treasury’s task of stimulating much-needed growth. The silver lining in the IMF’s report is that the UK’s inflationary pressures are largely 'temporary', with the labour market expected to loosen and wage growth to moderate."
He added: "Overall, the IMF message is clear: the UK economy is improving but still vulnerable. The budget must balance credibility with compassion — supporting growth and investment while keeping a firm grip on borrowing and inflation expectations."