Now the OECD upgrades Britain’s prospects saying economy WON’T go into recession this year – and will fare better than Germany – as Jeremy Hunt vows to ‘stick to the plan’ to tackle inflation
- The OECD has followed the IMF in dramatically overhauling UK GDP forecasts
The OECD today dramatically upgraded Britain’s growth prospects – admitting the country will not go into recession this year after all.
The international body followed the IMF by radically shifting its predictions for the UK.
Instead of the 0.2 per cent downturn it had pencilled in for this year in March, the economy is now set for a 0.3 per cent expansion.
GDP is also anticipated to rise 1 per cent in 2024, rather than the 0.9 per cent in the previous forecasts.
Jeremy Hunt hailed the change, saying it recognised the government’s moves to bolster childcare and competitive business taxes.
The OECD today dramatically upgraded Britain’s growth prospects – admitting the country will not go into recession this year after all
Jeremy Hunt hailed the change, saying it recognised moves to bolster childcare and competitive business taxes
However, the growth is still lacklustre by historic standards, and lags behind most of the G7. Only Germany, which fell into a recession over the start of the year and is set to stagnate in 2023, will perform worse.
The best performer among the G7 is set to be the US, with its economy forecast to grow by 1.6 per cent this year before easing to 1 per cent in 2024. That is partly due to Joe Biden’s extraordinary fiscal stimulus for cleaner industries.
‘The global economy is turning a corner but faces a long road ahead to attain strong and sustainable growth,’ OECD chief economist Clare Lombardelli said.
The Chancellor said: ‘Today’s report boosts our growth forecast, praises our action to help parents back to work with a major expansion of free childcare, and recognises our cuts to business taxes which aim to drive investment.
‘But while inflation is still too high, we must stick relentlessly to our plan to halve it this year. That is the only long term way to grow the economy and ease the cost of living pressures on families.’
The IMF executed a similar embarrassing overhaul to its forecasts last month.
It had predicted in January that the UK would be the worst-performing major economy in 2023 – with a 0.6 per cent fall in GDP, even worse than Russia.
That figure was then changed to a 0.3 per cent dip in April, before it finally conceded that ‘resilient demand’ and ‘declining energy prices’ meant that the UK should ‘avoid a recession and maintain positive growth in 2023’. It believes the economy will expand by a ‘subdued’ 0.4 per cent.
The OECD said today that the UK economy will be ‘propped up’ by Government investment and spending, including on energy bills support measures.
And as energy prices come down, inflation will ease and global economic conditions will improve.
‘However, weak household income growth will weigh on consumption despite the fall in inflation, monetary tightening will slow both housing and already sluggish business investment, and uncertainty will continue to reduce the contribution of trade to growth,’ the OECD said in its report.
Core inflation – which does not account for food and energy prices – is expected to be more persistent, only receding to 3.2 per cent in 2024, the projections show.
The IMF predicted in January that the UK would be the worst-performing major economy in 2023 – with a 0.6 per cent fall in GDP, even worse than Russia
And the prediction is for unemployment to rise, reaching 4.5 per cent next year.
The Paris-based organisation also stressed that women’s skills are not being fully utilised in the labour market, because they disproportionately work part-time due to caring duties.
It urged that the Government’s new childcare measure be ‘implemented swiftly’ to improve participation in the national workforce – which offers 30 hours a week of free childcare for working parents of children aged nine to 24 months.
The policy is not due to come into effect until 2024, and may not be fully in play until September 2025.
The OECD also said that energy support should be gradually withdrawn, except for measures supporting vulnerable households.
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