People walk across London Bridge in central London in the rain. Image date: Tuesday, March 12, 2024.
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Britain’s “sluggish” growth prospects will make it the worst-performing economy of all developed countries next year, according to the latest forecasts from the Organization for Economic Co-operation and Development.
The Paris-based think tank said in its report on Thursday that Britain’s gross domestic product (GDP) is expected to grow by 0.4% in 2024, down from a previous forecast of 0.7% and below all other G7 countries except Germany (0.2%). %).
The UK economy is expected to grow by 1% in 2025, trailing Canada, France, Germany, Japan and the United States as the lingering effects of high interest rates and inflation continue to take their toll.
The pessimistic forecast comes as the global economy shows signs of recovery, with growth expected to stabilize at 3.1% in 2024 before rising slightly to 3.2% in 2025.
“We are starting to see some recovery in many parts of the world,” Alvaro Pereira, director of policy research at the OECD, told CNBC’s Silvia Amaro on Thursday.
Growth in developed countries next year will be led by North America, with Pereira saying the United States will achieve a “strong growth” forecast of 2.6% in 2024.
Emerging economies are also showing signs of strengthening, the OECD said. In China, where the economy is struggling in part because of a protracted slump in the property market, growth forecasts have been revised up slightly from previous forecasts, which Pereira said was “a stronger performance than in the recent past.”
The OECD said the global outlook showed central banks’ efforts to curb inflation were working.
“Monetary policy is doing what it is supposed to do,” Pereira said. “Real incomes are starting to recover. That will help consumption. We also think inflation is starting to come down.”
However, he added that questions remain about the strength of the global recovery, especially amid signs that central banks are diverging on the future path of interest rates.
“The risk is obviously that if inflation persists above our expectations, then obviously monetary policy may have to remain restrictive for a longer period of time,” Pereira noted.
According to the OECD, overall inflation among its 38 member countries is expected to fall from 6.9% in 2023 to 5% in 2024, before falling further to 3.4% in 2025. The report said the recovery was around 2% in most major economies.
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