The International Monetary Fund has hiked its economic forecast for the UK this year and in 2018

Francesca Washtell
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The IMF has also revised up forecasts for Japan and Spain, but things aren't looking so good for Italy and South Korea (Source: Getty)

The International Monetary Fund (IMF) has revised up its UK growth forecasts for this year.

The IMF's previous guidance, released in October last year, estimated the economy would grow by 1.1 per cent in 2017.

But now the tables have turned - after higher-than-expected growth in the second half of last year, the IMF is now expecting economy activity in the UK to hike by 1.5 per cent in 2017, suggesting some of the immediate fears over the EU referendum result have now settled.

Read more: Christine Lagarde hits back at criticism of IMF's Brexit warnings

"Preliminary third-quarter growth figures were somewhat stronger than previously forecast in some economies, such as Spain and the United Kingdom, where domestic demand held up better than expected in the aftermath of the Brexit vote," the IMF said today.

The IMF raised alarm bells about a pro-Brexit vote last year, warning that an exit from the EU could do "severe regional and global damage by disrupting established trading relationships".

However, growth has been revised down by 0.3 per cent next year, taking it from 1.7 per cent to 1.4 per cent.

Read more: The IMF is too gloomy: Britain's economy is getting stronger not weaker

Britain chalked up growth of two per cent last year, and the organisation tipped the UK as being the fastest-growing G7 economy of 2016.

Country 2017 forecast (change from October) 2018 forecast (change from October)
World output 3.4 (0) 3.6 (0)
Advanced economies 1.9 (0.1) 2.0 (0.2)
US 2.3 (0.1) 2.5 (0.4)
Euro area 1.6 (0.1) 1.6 (0)
Germany 1.5 (0.1) 1.5 (0.1)
France 1.3 (0) 1.6 (0)
Italy 0.7 (-0.2) 0.8 (-0.3)
Spain 2.3 (0.1) 2.1 (0.2)
Japan 0.8 (0.2) 0.5 (0)
UK 1.5 (0.4) 1.4 (-0.3)
Canada 1.9 (0) 2.0 (0.1)
Other advanced economies 2.2 (-0.1) 2.4 (0)

Advanced economies are now projected to grow by 1.9 percent in 2017 and 2.0 percent in 2018, 0.1 and 0.2 percentage points more than in the October forecast, respectively.

Read more: IMF chief Lagarde found guilty in negligence trial - but gets no sentence

Growth projections for 2017 were also revised upwards for Germany, Japan and Spain, mostly "on account of a stronger-than-expected performance during the latter part of 2016", although Italy and South Korea's economic prospects were revised downwards.

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