People walk in the rain on London Bridge in central London. Photo date: Tuesday March 12, 2024.
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The UK’s “slow” growth outlook puts it on track to become the worst-performing economy of all advanced countries next year, according to new forecasts from the Organization for Economic Co-operation and Development.
The UK’s gross domestic product (GDP) is expected to grow by 0.4% in 2024, down from a previous forecast of 0.7%, and less than all other G7 countries except Germany (0.2%), the Paris-based think tank said in its report on Thursday. latest global economic outlook.
The UK economy is then forecast to grow by 1% in 2025, behind Canada, France, Germany, Japan and the United States, as the lingering effects of high interest rates and inflation continue to to weigh.
This pessimistic forecast comes as the global economy shows signs of recovery, with growth expected to remain stable at 3.1% in 2024, before increasing modestly to 3.2% in 2025.
“We are starting to see some recovery in many parts of the world,” Alvaro Pereira, director of the OECD’s policy studies branch, told CNBC’s Silvia Amaro on Thursday.
Growth in advanced economies next year is expected to be driven by North America, which Pereira said follows forecasts of “strong growth” of 2.6% in the United States in 2024. Growth in Europe , for its part, should accelerate next year after a sluggish 2024. .
Among emerging economies, the OECD said there were also signs of strength. In China, where the economy is struggling in part because of a prolonged slowdown in the property market, growth projections have been revised slightly upward from previous forecasts, which Pereira says is due to “a stronger performance than in the recent past”.
The OECD said the global outlook indicated that central banks’ efforts to curb inflation were working.
“Monetary policy is doing what it should be doing,” Pereira said. “Real incomes are starting to recover. This will support consumption. We also think inflation is starting to come down.”
He added, however, that questions remain about the strength of the global recovery, especially as central banks show signs of divergence on the future path of interest rates.
“The risk is obviously that if inflation continues to be higher than expected, it is obviously possible that monetary policy will have to remain restrictive for a little bit longer,” Pereira noted.
According to the OECD, headline inflation in its 38 member countries is expected to fall to 5% in 2024, from 6.9% in 2023, before falling further to 3.4% in 2025. By the end of 2025, inflation should return to targets of around 2% in most major economies, it says.
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