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UK economic growth downgraded for next two years – OECD

02 May 2024 3 minute read
Chancellor of the Exchequer Jeremy Hunt leaves 11 Downing Street, London, with his ministerial box before delivering his Budget. Photo Stefan Rousseau/PA Wire

The UK economy is set for “sluggish” growth over the next two years and is likely to miss previous forecasts, according to economists.

The Organisation for Economic Co-operation and Development (OECD) has downgraded its UK growth projections for 2024 and 2025, indicating it will witness the weakest growth across the G7 group of major economies next year.

The organisation said in its latest economic outlook report that there are “some signs that the global outlook has started to brighten” amid easing inflation.

Global gross domestic product (GDP) is expected to grow by 3.1% this year, unchanged from 2023.

However, the UK’s economy is expected to grow at a much slower rate after interest rate rises in order to bring down inflation.

The economic organisation said “GDP growth is projected to remain sluggish” in the face of a “waning drag from past monetary tightening”.

The economy grew by 0.1% last year and is expected to see growth improve to 0.4% this year, the OECD said.

However, it represents a downgrade to forecasts after previously predicting 0.7% growth for 2024.

Forecast

It also means it is on track to record the second weakest growth across the G7, with only Germany – which has a growth forecast of 0.2% – due to see a smaller increase.

On Thursday, the new report also said the economy is on track to grow by around 1% next year. This is slower than projected for Germany and the other G7 nations – Canada, France, Italy, Japan and the US.

The OECD said higher wages will help consumer spending over the next two years but could contribute to inflationary pressure as the Bank of England continues with efforts to get Consumer Price Index (CPI) inflation down to its 2% target rate.

“Stronger real wage growth will support a modest pick-up in private consumption,” the report said.

“Headline inflation is expected to continue moderating towards target as energy and food prices have eased substantially, but persistent services price pressures will keep core inflation elevated at 3.3% in 2024 and 2.5% in 2025.”

It also predicts the Bank of England’s Monetary Policy Committee (MPC) will start cutting interest rates – which currently sit at a 15-year-high of 5.25% – in the third quarter of this year.

UK interest rates are on track to drop to 3.75% by the end of 2025, it said.

Inflation

Meanwhile, the UK’s unemployment rate is expected to rise over the period.

The unemployment rate unexpectedly increased to 4.2% for the latest three-month period to February.

The OECD said this is due to continue increasing and reach as high as 4.7% in 2025 “as the labour market cools”.

Chancellor of the Exchequer Jeremy Hunt said: “This forecast is not particularly surprising given our priority for the last year has been to tackle inflation with higher interest rates.

“But, now we are winning that war, growth matters, which is why it is significant that last month the IMF (International Monetary Fund) predicted the UK will grow faster over the next six years than any European G7 country or Japan.

“To sustain that we need to stick to our plan – competitive taxes, a flexible labour market and far-reaching welfare reform.”


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Mab Meirion
Mab Meirion
15 days ago

Sunak, Hunt and Gove Partners @Slash, Burn, Pillage UK…

hdavies15
hdavies15
15 days ago
Reply to  Mab Meirion

…….working closely with their pals at LootCon&Fleece…..

Mab Meirion
Mab Meirion
15 days ago
Reply to  hdavies15

Oh! to be in the Con Club tonight…other clubs are available…

Jeff
Jeff
15 days ago

Wonder how much Sunaks funds have increased since he has been in No11/10. Hunt is a rich land lord, they wont have to worry over a single bill.

Fi yn unig
Fi yn unig
15 days ago

‘We have a plaaan. We must stick to the plaaan. We need to be elected another 20 consecutive times to implement our 100 year plaaan. Labour doesn’t have a plaaan’. I have a plan. Get rid of the Tories.

Dai Ponty
Dai Ponty
15 days ago

After WRECKING the N H S this excuse for a human being is wrecking the economy carrying on from where Sunak left off

Dr John Ball
Dr John Ball
15 days ago
Reply to  Dai Ponty

The nhs in Wales is a SENEDD responsibility!!!!!!
I am no lover of the Tories but please get your facts right and indeed lay the blame for our abysmal nhs where is lies in Wales – with the WELSH government!

Jeff
Jeff
15 days ago
Reply to  Dr John Ball

Hunt wrecked the English NHS, they continue to do so. Spill over will happen.
https://www.opendemocracy.net/en/jeremy-hunt-tory-leadership-boris-johnson-nhs-junior-doctors/

Dai Ponty
Dai Ponty
15 days ago
Reply to  Dr John Ball

Yes but dont forget the money they have cut from the Welsh Budget do you think the N H S in Jolly old Tory England is any better no its bloody not you read the Tory rags that tell you the Welsh N H S is worse use your own senses EYES EARS and look at what goes on in England people like you make me sick TORY BOY

Dr John Ball
Dr John Ball
15 days ago
Reply to  Dai Ponty

Just re-read Dai Ponty’s comment. The economy of Wales is a WELSH government responsibility!!!!!
The desperately sad thing is that while the Tories continue in to illustrate their gross incompetence, this gives the opportunity for people like Dai to avoid putting the blame for our problems here where it really belongs – The Senedd and the Welsh government!

Dai Ponty
Dai Ponty
15 days ago
Reply to  Dr John Ball

For gods sake we do not have the money given to Wales to run our Economy its TIED IN TO ENGLAND U K ECONOMY what bloody planet are you on the state of the U K is down to those in London you are a real TORY BOY

Dr John Ball
Dr John Ball
14 days ago
Reply to  Dai Ponty

You obviously know nothing about economics.

Dai Ponty
Dai Ponty
15 days ago
Reply to  Dr John Ball

You are what i would call a TRAITOR to the WELSH PEOPLE a QUISLING are you English Johny Ball

Mab Meirion
Mab Meirion
15 days ago

Yer getting sacked in the morning, goes the chant…

To the present manager of the Matthew Parker Street’s worst eleven…

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