Outlook for 2025 and 2026
The UK economy operates within a global context. The IMF set out its latest observations in its October 2025 Global Outlook.
- After a resilient start, the global economy is showing signs of a moderate slowdown.
- Incoming data in the first half of 2025 showed robust activity.
- Inflation in Asian economies was subdued, while it remained steady in the United States.
- This apparent resilience seems to be largely attributable to temporary factors—such as front-loading of trade and investment and inventory management strategies— rather than to fundamental strength.
- As these factors fade, weaker data are surfacing.
- The front-loading is unwinding, and labor markets are softening.
- Pass-through of tariffs to US consumer prices, previously muted, appears increasingly likely.
- Advanced economies, traditionally reliant on immigration, are seeing sharp declines in net labor inflows, with implications for potential output.
- Global growth projections slow from 3.3 percent in 2024 to 3.2 percent in 2025 and to 3.1 percent in 2026.
- On an end-of-year basis, global growth projections slow from 3.6 percent in 2024 to 2.6 percent in 2025.
- Advanced economies’ growth forecasts rise by about 1½ percent in 2025–26, with the United States slowing to 2.0 percent.
- Emerging market and developing economies moderate their growth to just above 4.0 percent.
- Inflation forecasts decline to 4.2 percent globally in 2025 and to 3.7 percent in 2026, with above-target inflation in the United States—with risks tilted to the upside—and subdued inflation in much of the rest of the world.
- World trade volume is forecast to grow at an average rate of 2.9 percent in 2025–26—boosted by front-loading in 2025 yet still much slower than the 3.5 percent growth rate in 2024—with persistent trade fragmentation limiting gains.
- Risks to the outlook remain tilted to the downside.
Table 4.1: Annual percentage changes in GDP (source: IMF)
| 2022 | 2023 | 2024 | 2025P | 2026P | |
|---|---|---|---|---|---|
| World Output | 3.8 | 3.5 | 3.3 | 3.2 | 3.1 |
| Advanced Economies | 3.0 | 1.7 | 1.8 | 1.6 | 1.6 |
| Emerging Market and Developing Economies | 4.3 | 4.7 | 4.3 | 4.2 | 4.0 |
| China | 3.1 | 5.4 | 5.0 | 4.8 | 4.2 |
| Euro Area | 3.6 | 0.4 | 0.9 | 1.2 | 1.1 |
| Advanced Economies | |||||
| United States | 2.5 | 2.9 | 2.8 | 2.0 | 2.1 |
| Spain | 6.4 | 2.5 | 3.5 | 2.9 | 2.0 |
| Other Advanced Economies* | 3.7 | 0.7 | 2.0 | 1.4 | 1.8 |
| United Kingdom | 4.8 | 0.4 | 1.1 | 1.3 | 1.3 |
| Canada | 4.2 | 1.5 | 1.6 | 1.2 | 1.5 |
| Japan | 1.0 | 1.2 | 0.1 | 1.1 | 0.6 |
| France | 2.8 | 1.6 | 1.1 | 0.7 | 0.9 |
| Italy | 4.8 | 0.7 | 0.7 | 0.5 | 0.8 |
| Germany | 1.8 | -0.9 | -0.5 | 0.2 | 0.9 |
| Source: IMF, October 2025 | |||||
*Excludes the G7 (Canada, France, Germany, Italy, Japan, United Kingdom, United States) and Euro Area countries.
GDP rankings
The US (26.4%), EU (17.5%) and China (16.9%) dominate the world economy, accounting for 60.8% of global nominal GDP of $111 trillion in 2024 – see Figure 4.1.
Figure 4.1: World nominal GDP in 2024 (source: IMF)
The UK accounted for $3.6 trillion or 3.3% of global nominal GDP in 2024. The UK ranked sixth globally, behind the US, EU, China, Japan and India. Treating the EU member states as separate countries, the UK also ranked sixth globally, behind Germany (ranking third), but ahead of France (ranking seventh).
However, to compare countries, economists prefer to use the Purchasing Power Parity (PPP) method. This is a better basis for comparisons because the cost of living differs between countries. A dollar in India buys more than a dollar in the US, but exchange rates do not necessarily fully reflect these differences.
The PPP method converts GDP to an indicator of comparable purchasing power for a common basket of goods and services. Using PPP, global GDP and the ranking of countries change greatly (see Figure 4.2).
- World GDP increases to $198 trillion (by almost 80% from $111 trillion).
- China comes top with 19.3% of world GDP, substantially ahead of the US (14.8%) and the EU (14.2%), with the UK ranking 9th on 2.2%.
- Treating the EU as separate countries, the UK ranks 10th below China, US, India (8.2%), Russia (3.5%), Japan (3.3%), Germany (3.0%), Indonesia (2.4%), Brazil (2.4%) and equal to France with 2.2%.
Figure 4.2: World PPP GDP in 2024 (source: IMF)
GDP per capita
To get a better indication of relative national wealth, economists adjust PPP GDP for population.
GDP per capita is a simple average measure of national wealth (see Table 4.2 for the top 40 countries in 2024). Please note that GDP-per-capita does not consider how wealth is distributed across a country’s population.
The top countries include several countries with small populations (such as Liechtenstein and San Marino) or huge wealth from natural resources (such as Qatar, Brunei and Guyana).
On a PPP GDP per capita basis, the UK is becoming relatively poorer. In 2024, the UK ranked:
- 33rd globally, and had dropped four places since 2017;
- below 17 European countries (in descending order: Liechtenstein, Luxembourg, Ireland, Norway, Switzerland, Denmark, Netherlands, San Marino, Iceland, Malta, Belgium, Austria, Germany, Sweden, Finland, France and Cyprus).
Table 4.2: PPP GDP per capita 2024
| Position in 2024 | Country | PPP GDP per capita* | Position in 2017 | Places up or (down) |
|---|---|---|---|---|
| 1 | Liechtenstein | 195,977 | 1 | - |
| 2 | Singapore | 150,908 | 4 | 2 |
| 3 | Luxembourg | 149,987 | 3 | - |
| 4 | Ireland | 133,987 | 6 | 2 |
| 5 | Macao SAR | 128,211 | 2 | -3 |
| 6 | Qatar | 116,616 | 5 | -1 |
| 7 | Norway | 103,733 | 9 | 2 |
| 8 | Switzerland | 95,155 | 8 | - |
| 9 | Brunei Darussalam | 91,437 | 10 | 1 |
| 10 | United States | 86,145 | 11 | 1 |
| 11 | Guyana | 83,604 | 108 | 97 |
| 12 | Denmark | 81,806 | 15 | 3 |
| 13 | Netherlands | 81,354 | 14 | 1 |
| 14 | San Marino | 80,358 | 18 | 4 |
| 15 | Taiwan Province of China | 80,091 | 25 | 10 |
| 16 | United Arab Emirates | 79,253 | 7 | -9 |
| 17 | Iceland | 78,937 | 13 | -4 |
| 18 | Hong Kong SAR | 75,541 | 12 | -6 |
| 19 | Malta | 75,339 | 28 | 9 |
| 20 | Belgium | 73,609 | 22 | 2 |
| 21 | Austria | 73,061 | 17 | -4 |
| 22 | Germany | 71,797 | 16 | -6 |
| 23 | Saudi Arabia | 71,479 | 19 | -4 |
| 24 | Sweden | 71,396 | 21 | -3 |
| 25 | Andorra | 70,604 | 20 | -5 |
| 26 | Australia | 69,352 | 24 | -2 |
| 27 | Bahrain | 67,039 | 23 | -4 |
| 28 | Finland | 64,696 | 27 | -1 |
| 29 | France | 64,242 | 31 | 2 |
| 30 | Canada | 63,870 | 26 | -4 |
| 31 | Korea, Republic of | 62,885 | 32 | 1 |
| 32 | Cyprus | 62,305 | 39 | 7 |
| 33 | United Kingdom | 62,011 | 29 | -4 |
| 34 | Italy | 61,254 | 33 | -1 |
| 35 | Czech Republic | 56,953 | 38 | 3 |
| 36 | Slovenia | 55,914 | 41 | 5 |
| 37 | Spain | 54,675 | 36 | -1 |
| 38 | Lithuania | 54,369 | 45 | 7 |
| 39 | New Zealand | 54,351 | 34 | -5 |
| 40 | Israel | 54,126 | 37 | -3 |
| Source: IMF Datamapper | *PPP, current prices, international USD | |||
Income inequality
To show how income is distributed across a population, statisticians use the Gini Coefficient. A Coefficient of 0 means that income is distributed perfectly evenly, a Coefficient of 1 means complete inequality.
The UK had the highest income inequality of all European countries except for Turkey and Bulgaria (based on after-tax income) in 2022.
For more on income inequality in the UK, please see the research briefing by the House of Commons Library on Income Inequality in the UK, April 2024.
Figure 4.3: Income inequality in Europe for 2022 (source: OECD)
