IMF outlook for 2026 and 2027
The global economic context matters for the UK. This is because the UK economy is relatively open with international trade, foreign investment and labour mobility playing important roles. The IMF set out its latest observations in its April 2026 Global Outlook – ‘Global Economy in the Shadow of War’. Here are some key extracts.
- [“Over the past year, headwinds from higher trade barriers and elevated uncertainty have been offset by tailwinds from technology-related investment; accommodative financial conditions, including a weaker US dollar; and fiscal and monetary policy support.
- The Middle East conflict presents a significant counterforce to these tailwinds through its impact on commodity markets, inflation expectations, and financial conditions.
- The IMF’s “reference forecast” assumes that the war will have limited duration, intensity, and scope, such that the disruptions will fade by mid-2026:
- Global growth is 3.1 percent in 2026 and 3.2 percent in 2027, slower than its recent pace of about 3.4 percent in 2024–25, and is expected to settle at about that rate in the medium term, slower than its historical (2000–19) average of 3.7 percent.
- The forecast for 2026 is down by 0.2 of a percentage point and for 2027 is unchanged, compared with those in the January 2026 WEO Update.
- Global headline inflation increases to 4.4 percent in 2026 and declines to 3.7 percent in 2027, marking upward revisions for both years.
- Scaling up of defence spending prompted by a rise in geopolitical tensions could boost economic activity in the short term but also brings about inflationary pressures, weakens fiscal and external sustainability, and risks crowding out social spending, which could in turn ignite discontent and social unrest.
- In the United Kingdom:
- The war and a slower pace of monetary easing lead growth to decline from 1.3 percent in 2025 to 0.8 percent in 2026, a downward revision of 0.5 percentage point relative to the October 2025 forecast.
- Growth recovers to 1.3 percent in 2027, slower than expected before the war as the impact of higher energy prices lingers.
- Inflation, which in 2025 increased partly because of one-off changes in regulated prices, picks up again temporarily toward 4 percent before returning to target by the end of 2027 as the effects of higher energy prices fade and a weakening labour market continue to exert downward pressure on wage growth.”]
Risks are weighted to the downside (for example the US-Israel-Iran conflict continuing) and the IMF provides additional forecasts for downside scenarios.
| 2022 | 2023 | 2024 | 2025 | 2026P | 2027P | |
|---|---|---|---|---|---|---|
| World Output | 3.8 | 3.3 | 3.4 | 3.4 | 3.1 | 3.2 |
| Advanced Economies | 3.1 | 1.7 | 1.8 | 1.9 | 1.8 | 1.7 |
| Emerging Market and Developing Economies | 4.3 | 4.4 | 4.5 | 4.4 | 3.9 | 4.2 |
| China | 3.1 | 5.4 | 5.0 | 5.0 | 4.4 | 4.0 |
| Advanced Economies | ||||||
| United States | 2.5 | 2.9 | 2.8 | 2.1 | 2.3 | 2.1 |
| Euro Area | 3.6 | 0.4 | 0.9 | 1.4 | 1.1 | 1.0 |
| Germany | 1.8 | -0.9 | -0.5 | 0.2 | 0.8 | 1.2 |
| France | 2.8 | 1.6 | 1.1 | 0.9 | 0.9 | 0.9 |
| Italy | 4.8 | 0.9 | 0.8 | 0.5 | 0.5 | 0.5 |
| Spain | 6.4 | 2.5 | 3.5 | 2.8 | 2.1 | 1.8 |
| Japan | 1.3 | 0.7 | -0.2 | 1.2 | 0.7 | 0.6 |
| United Kingdom | 5.1 | 0.3 | 1.1 | 1.3 | 0.8 | 1.3 |
| Korea | 2.7 | 1.6 | 2.0 | 1.0 | 1.9 | 2.1 |
| Canada | 4.7 | 2.0 | 2.0 | 1.7 | 1.5 | 1.9 |
| Other Advanced Economies* | 3.6 | 1.5 | 2.1 | 2.5 | 2.1 | 2.0 |
| Source: IMF, April 2026 | ||||||
GDP rankings
The US ($30.8 trillion or 26% of world GDP), EU ($21.2 trillion or 18%) and China ($19.6 trillion or 17%) continue to dominate the world economy, accounting for 61% of global nominal GDP of $118 trillion in 2025 – see Figure 4.1.
Figure 4.1: World nominal GDP in 2025 (source: IMF)
The UK accounted for $4.0 trillion or 3.4% of global nominal GDP in 2025, just above India ($3.9 trillion) The UK ranked fifth globally, behind the US, EU, China and Japan. Treating the EU member states as separate countries, the UK also ranked fifth globally, behind Germany (ranking third), but ahead of France (eighth) and Italy (tenth).
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).
- China comes top with 19.6% of world PPP GDP, substantially ahead of the US (14.6%) and the EU (14.0%), with the UK ranking 10th on 2.2%.
- India is now the fourth largest economy on 8.2% and Russia fifth on 3.4%. Indonesia (2.4%) and Brazil (2.4%) also have bigger economies than the UK.
- Treating the EU as separate countries, the UK also ranks 10th below Germany (2.9%) and equal to France with 2.2%.
Figure 4.2: Share of world PPP GDP in 2025 (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 wealthy countries with small populations (such as Liechtenstein, Luxembourg and San Marino) or huge wealth from natural resources (such as Qatar).
On a PPP GDP per capita basis, the UK ranked much lower than it does in terms of size of PPP GDP:
- 20th globally, and had risen three places since 2016
- below 13 European countries (in descending order: Liechtenstein, Luxembourg, Ireland, Switzerland, Iceland, Norway, Denmark, Netherlands, San Marino, Austria, Sweden, Belgium, Germany).
Table 4.2: PPP GDP per capita 2025
| 2025 rank | Country | PPP GDP per capita* | 2016 rank | Change |
|---|---|---|---|---|
| 1 | Liechtenstein | 217.9 | 1 | = |
| 2 | Luxembourg | 148.2 | 2 | = |
| 3 | Ireland | 130.7 | 7 | 4 |
| 4 | Switzerland | 115.6 | 3 | -1 |
| 5 | Singapore | 99.4 | 10 | 5 |
| 6 | Iceland | 99.1 | 6 | = |
| 7 | Norway | 94.5 | 4 | -3 |
| 8 | United States | 90.0 | 8 | = |
| 9 | Denmark | 77.0 | 11 | 2 |
| 10 | Macao SAR | 74.5 | 5 | -5 |
| 11 | Netherlands | 73.8 | 14 | 3 |
| 12 | Qatar | 69.7 | 9 | -3 |
| 13 | Australia | 66.4 | 12 | -1 |
| 14 | San Marino | 65.5 | 16 | 2 |
| 15 | Austria | 63.2 | 15 | = |
| 16 | Sweden | 62.7 | 13 | -3 |
| 17 | Belgium | 61.0 | 21 | 4 |
| 18 | Germany | 60.4 | 19 | 1 |
| 19 | Israel | 60.3 | 27 | 8 |
| 20 | United Kingdom | 57.6 | 23 | 3 |
| 21 | Hong Kong SAR | 56.9 | 18 | -3 |
| 22 | Finland | 56.5 | 17 | -5 |
| 23 | Canada | 55.8 | 20 | -3 |
| 24 | Andorra | 50.4 | 25 | 1 |
| 25 | United Arab Emirates | 50.2 | 22 | -3 |
| 26 | Malta | 49.3 | 36 | 10 |
| 27 | France | 48.9 | 28 | 1 |
| 28 | New Zealand | 48.6 | 26 | -2 |
| 29 | Italy | 43.3 | 30 | 1 |
| 30 | Cyprus | 41.7 | 38 | 8 |
| 31 | Aruba | 41.5 | 33 | 2 |
| 32 | Bahamas, The | 40.0 | 29 | -3 |
| 33 | Puerto Rico | 39.8 | 32 | -1 |
| 34 | Taiwan | 39.5 | 40 | 6 |
| 35 | Spain | 38.3 | 37 | 2 |
| 36 | Slovenia | 37.4 | 42 | 6 |
| 37 | Korea | 36.2 | 31 | -6 |
| 38 | Japan | 36.0 | 24 | -14 |
| 39 | Czech Republic | 35.7 | 46 | 7 |
| 40 | Saudi Arabia | 35.5 | 41 | 1 |
| 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)
