LONDON, April 14 (Xinhua) - The International Monetary Fund(IMF) has downgraded the United Kingdom's economic growth outlook more sharply than any other major advanced economy, saying the country remains particularly exposed to rising energy prices and global geopolitical tensions.
In its latest World Economic Outlook update on Tuesday, the IMF cut its forecast for UK gross domestic product (GDP) growth in 2026 to 0.8 percent, down from previous 1.3 percent, marking the steepest downgrade among the Group of Seven (G7) economies. Growth is expected to recover to 1.3 percent in 2027,though slower than expected before the war as the impact of higher energy prices lingers.
The move follows a similar assessment by the Organisation for Economic Co-operation and Development (OECD), which also significantly downgraded its outlook for the UK, reinforcing concerns over the country's growth momentum.
The revision comes amid latest tensions in the Middle East, which erupted on Feb. 28 following joint U.S.-Israeli strikes on Iran and have fueled volatility in global energy markets and increased pressure on energy-importing economies.
The IMF said the UK would be among the most affected by the energy shock, citing its reliance on imported energy and the central role of gas in household heating and electricity pricing.
The IMF noted that these structural factors, together with relatively high levels of government debt, leave limited room for the government to cushion households from rising costs.
The IMF projected that inflation in the UK would remain higher than in most other advanced economies, averaging 3.2 percent in 2026 and potentially approaching 4 percent before easing back toward the Bank of England's 2 percent target by the end of 2027.
It added that rising energy costs and a weakening labor market are likely to weigh on real incomes and wage growth, with unemployment expected to rise to about 5.6 percent.
A recent study by the Resolution Foundation found that rising energy prices could wipe out expected gains in living standards, leaving typical UK households around 480 pounds (about 650 U.S. dollars) worse off this year.
Despite mounting pressure on living standards, the UK government has so far refrained from large-scale subsidy programs, citing fiscal constraints. Instead, it has focused on targeted support measures, including assistance for households reliant on heating oil, which are not covered by the country's regulated energy price cap.
Responding to the IMF's assessment, UK Chancellor of the Exchequer Rachel Reeves said the country would face unavoidable economic costs from the conflict.
"The war in Iran is not our war, but it will come at a cost to the UK," Reeves said ahead of the IMF and World Bank Spring Meetings in Washington.
She added that the government would seek to balance support for households and businesses with maintaining economic stability.
"I have vowed that my economic approach to this crisis will be both responsive to a changing world and responsible in the national interest, keeping inflation and interest rates in check," she said. ■