People walk in the rain across London Bridge in central London. Picture date: Tuesday March 12, 2024.
Lucy North – Pa Pictures | Pa Pictures | Getty Images
Britain’s “sluggish” growth prospects are on track to be the worst-performing economy of any developed nation next year, according to new forecasts from the Organization for Economic Co-operation and Development.
The U.K.’s gross domestic product is expected to grow by 0.4% in 2024, the Paris-based think tank said on Thursday in its latest global economic outlook. This figure is below a previous forecast of 0.7% and below the figure for all other G7 countries except Germany, which is expected to be 0.2%.
The UK economy is then expected to grow by 1% in 2025, underperforming Canada, France, Germany, Japan and the US, as the ongoing impact of high interest rates and inflation continues to weigh.
The optimistic forecast comes at a time when the global economy is showing signs of recovery. The forecast is for growth to remain stable at 3.1% in 2024 before increasing slightly to 3.2% in 2025.
“We are seeing some recovery in many parts of the world,” Alvaro Pereira, director of the OECD’s policy studies division, told CNBC’s Silvia Amaro on Thursday.
Growth in advanced markets next year is expected to be led by North America, which Pereira said follows “strong growth forecasts” of 2.6% in the U.S. in 2024. Growth in Europe is expected to rebound next year after a sluggish 2024.
There were also signs of strength among emerging markets, according to the OECD. In China, where the economy has struggled in part due to a prolonged downturn in the real estate market, growth forecasts were revised slightly upwards from previous forecasts, reflecting a “stronger performance than in the recent past,” according to Pereira.
The OECD said the global outlook was an indication that central banks’ efforts to contain inflation were working.
“Monetary policy is doing what it should do,” Pereira said. “Real incomes are starting to recover. This will boost consumption. We also expect inflation to gradually decline.”
But he added that questions remain about how robust the global recovery would be, particularly as central banks show signs of divergence over the future path of interest rates.
“The risk, of course, is that monetary policy may have to remain restrictive for a little longer if inflation remains more stubborn than expected,” Pereira noted.
According to the OECD, headline inflation across its 38 member states is expected to fall from 6.9% in 2023 to 5% in 2024 and then fall further to 3.4% in 2025. By the end of 2025, inflation is expected to return to its target levels. In most major economies, the rate is around 2%, according to the OECD.
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2024-05-02 16:35:27
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