The United Kingdom and the United States are positioned as the growth leaders within the G7 this year, according to the latest global economic update. The UK is expected to be the second fastest-growing economy in the group, with its GDP forecast modestly increased to 1.3%, while the US leads the pack with 2% growth.
However, this positive growth story is accompanied by significant warnings. The UK, in particular, is projected to face the highest inflation rate in the G7 in both 2025 and 2026, with the forecast for next year now standing at 3.4%. This raises serious concerns about the cost of living and the challenges facing the Bank of England.
The report also identifies major self-inflicted risks for the US economy. Its crackdown on immigration is forecast to directly reduce its GDP growth by between 0.3% and 0.7%. This policy is also expected to stoke inflationary pressures in labor-intensive sectors like construction and hospitality.
The overall global picture, while showing “unexpected resilience” with a growth upgrade to 3.2% for this year, is described as “dim” in the longer term. This is largely because the full, negative impact of trade tariffs on global business investment has been delayed but is still anticipated.
Adding to the concerns are “stretched valuations” in global stock markets. The report warns of a potential “correction,” especially if the hype surrounding artificial intelligence cools. Such a downturn in financial markets could lead to a sharp fall in investment, which has been a key engine of recent economic growth for the G7 and the world.
G7 Outlook: UK and US Lead Growth, But Inflation and Policy Risks Loom
