IMF Backs UK Budget Repair as 2026 Growth Forecast Rises

IMF economic counsellor Silvana Tenreyro told UK Chancellor John Healey to "stay the course" and keep repairing Britain's public finances.

She spoke at the launch of the IMF's twice-yearly World Economic Outlook during the Fund's annual meetings in Bangkok, according to reporting published on 13 October 2026. Tenreyro is a former member of the Bank of England's Monetary Policy Committee, the group that sets UK interest rates. The Fund describes the World Economic Outlook as a survey of prospects and policies by IMF staff, usually published twice a year with updates in between The Guardian.

Tenreyro said the UK "stands out" among the G7, the group of seven large advanced economies, for having a plan to narrow its deficit. A deficit means the government spends more than it collects in tax. She added: "The UK has already started a consolidation process." Consolidation means bringing that gap down through lower spending, higher revenue, or both. Think of it as closing the gap between pay and spending.

That advice came with better near-term growth numbers. The IMF now expects UK GDP, the total value of goods and services produced, to grow 1.3% in 2026, up 0.3 percentage points from its July 2026 update. The economy grew 0.6% in the first quarter of 2026 and 0.5% in the second quarter. For 2027, the Fund lowered its UK forecast to 1.2% from 1.3%.

Bank of England policymaker Megan Greene said the upgrade showed UK interest rates should be higher. Her comment connects stronger output to the debate over borrowing costs, without deciding that debate.

In the same outlook, the IMF warned governments against across-the-board subsidies. Any support, it said, should be "temporary, targeted and non-distortionary." In plain terms, help should be short-lived, aimed at a clear problem, and designed not to warp prices or competition.

The UK forecasts have changed several times. The July 2026 update, titled 'Global Economy in Crosscurrents of War and Technology' and published on 8 July 2026, had implied about 1.0% growth for 2026. In April 2026, the IMF cut its 2026 UK forecast to 0.8% from 1.3%. In May 2026, it raised that forecast to 1.0% from 0.8% Reuters. Earlier, in October 2025, the IMF forecast 1.3% UK growth in both 2025 and 2026, above the G7 average. In that same round, it forecast UK inflation would stay the highest in the G7.

The global forecasts have moved lower through 2026. The January 2026 update projected global growth of 3.3% in 2026 and 3.2% in 2027. The April 2026 outlook projected 3.1% in 2026 and 3.2% in 2027 IMF. In July 2026, the IMF forecast 2026 global growth at 3.0%, compared with an average of 3.5% in 2024 and 2025.

That timing follows the Fund's regular calendar. It published the April 2026 outlook, titled 'Global Economy in the Shadow of War,' on 14 April 2026. It published the January 2026 update, titled 'Global Economy: Steady amid Divergent Forces,' on 19 January 2026. It published the October 2025 outlook, titled 'Global Economy in Flux, Prospects Remain Dim,' on 14 October 2025. Its July 2025 update projected global growth of 3.0% for 2025 and 3.1% for 2026.

The broader context here is the pull between budget discipline and slightly better growth. A move to 1.3% gives the chancellor more room in the numbers, but it has not changed the Fund's prescription. Tenreyro's point about a G7 standout plan suggests the IMF sees steady deficit reduction as the anchor for UK policy.

Looking at what this means for policymakers, two tensions are now clear. Continued budget tightening holds back demand, and higher rates of the kind Greene favors would also hold back demand. At the same time, the cut to 1.2% for 2027 limits how much optimism from 2026 can carry forward. The open question is whether strong early-2026 results show lasting strength or a short burst that fades under tight policy and tightly limited support.