Surging US imports and lower tariffs to lift global growth, IMF predicts
This is higher than the respective 2.8% and 3% forecast in the previous report in April.
UK gross domestic product (GDP) is predicted to be 1.2% this year, and 1.4% in 2026, unchanged from revised forecasts set out in May.
The upgrade to the world outlook reflects factors including a strong degree of trade 'front-loading' in recent months – referring to a rush of imports into the US.
This has happened as businesses and households tried to get ahead of planned increases to US tariff rates, following Mr Trump's 'liberation day' announcements in April, according to the report.
The IMF raised its growth forecast for the global economy (Alamy/PA)
The IMF said front-loading had 'shaped economic activity in the first half of the year', adding that it was 'creating exposures that could amplify the impact of any potential negative shocks'.
For example, firms could end up having too much stock, therefore pushing down future imports, or it could lead to additional holding costs or the risk of items becoming obsolete.
Meanwhile, the growth upgrade since April was also driven by US tariffs being lowered since higher rates were first announced by Mr Trump, alongside improved conditions in the financial markets.
This came after the US struck new trade deals, including with the UK and, most recently, the EU.
The introduction of some higher tariff rates have also been paused until August, notably between China and the US, helping diffuse escalating trade tensions and open the door to negotiations.
However, the IMF warned that a 'rebound in effective tariff rates could lead to weaker growth' and weigh on wider sentiment.
'Elevated uncertainty could start weighing more heavily on activity, also as deadlines for additional tariffs expire without progress on substantial, permanent agreements,' the report said.
Furthermore, the IMF flagged conflict in the Middle East creating potential risks to global shipping and trade, which could further raise commodity prices like oil.
On the other hand, the report found that global growth could be lifted if trade negotiations lead to lower tariffs, ease tensions, and create more certainty and predictability.
The IMF also highlighted technological advancements, including the use of artificial intelligence (AI), as a way to further boost growth around the world.
Chancellor Rachel Reeves said: 'The IMF's forecasts show that the UK remains the fastest growing European economy in the G7 despite the global economic challenges we are facing.
'However, I am determined to unlock Britain's full potential, which is why we are investing billions of pounds through our plan for change – in jobs through better city region transport, record funding for affordable homes, as well as backing major projects like Sizewell C to drive economic growth and put more money into people's pockets.'
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