International Economic

IMF calls on UK's Reeves to amend fiscal rules, ups growth forecasts

By Frank Prenesti

Date: Tuesday 27 May 2025

(Sharecast News) - UK Finance Minister Rachel Reeves should ease her fiscal rules to avoid emergency cuts to public services, the International Monetary Fund said on Tuesday as it also nudged up growth forecasts for the British economy this year.
The IMF said it expected the economy to grow by 1.2% from a prior forecast of 1.1%. Last month the fund slashed its forecasts from 1.6% to 1.1% in the wake of US President Donald Trump's erratic trade policies.

"These revisions reflect the strong GDP performance in the first quarter, reflecting the resilience of the UK economy despite the complex external environment," said Luc Eyraud, the IMF's mission chief to the UK.

However, the IMF also warned that trade tensions linked to US tariff plans will cut UK economic growth next year, taking 0.3 percentage points off expansion for the year, although it still forecast growth will rise 1.4% in 2026.

In a major move, the IMF also said Reeves loosens her self-imposed fiscal rules to stop the need for emergency public spending cuts.

The minister has come under fire for axing winter energy payments for pensioners and cutting more than £5bn from the welfare budget in what many claim is a return to the austerity measures of sacked Conservative finance minister George Osborne after the 2008 financial crash caused by the banking industry.

"There is still significant pressure for frequent fiscal policy changes, given that small revisions to the economic outlook can erode the headroom within the rules, which is the subject of intense market and media scrutiny."

The IMF called for a change to the twice-yearly assessment of the domestic economy inherited from the Conservatives, saying Reeves could downgrade the significance of spring report among other measures.

Reporting by Frank Prenesti for Sharecast.com

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