Britain’s economy is expected to grow more quickly than previously forecast, and ahead of Germany, France, Italy and the eurozone as a whole, according to the International Monetary Fund (IMF).

The Washington-based group’s upgrade to the UK’s GDP to 1.6% this year from 1.5% predicted in October will be welcome news for the beleaguered Labour government.

Its report also criticised plans by incoming president Donald Trump to introduce large-scale tax cuts, import tariffs and weaker regulations that could prove inflationary.

While upgrading the UK, the report says growth will remain well behind the US, Canada and Spain and the data shows it saw weaker growth last year than the organisation had forecast, up by 0.9% last year against its previous forecast of 1.1%.

It expects the Bank of England to cut interest rates four times this year, reducing the headline rate from 4.75% to 3.75%, a move given wider support after last week’s fall in inflation to 2.5%.

The IMF data came after a surge in government borrowing weaker-than-expected GDP growth of 0.1% in November and zero growth over the third quarter of the year.

Responding to the latest data, Chancellor Rachel Reeves said: “The UK is forecast to be the fastest growing major European economy over the next two years and the only G7 economy, apart from the US, to have its growth forecast upgraded for this year.

“I will go further and faster in my mission for growth through intelligent investment and relentless reform, and deliver on our promise to improve living standards in every part of the UK through the plan for change.”

The IMF forecast that the wider global economy will grow by 3.3% in both 2025 and 2026, with a 0.1 percentage point upgrade for this year. “Global growth is expected to remain stable, albeit lacklustre,” the report said.

It added that “inflation is declining, to 4.2% this year and 3.5% next year, in a return to central bank targets that will allow further normalisation of monetary policy.

“This will help draw to a close the global disruptions of recent years, including the pandemic and Russia’s invasion of Ukraine, which precipitated the largest inflation surge in four decades.”