Sluggish Growth Projected for U.K., Placing It Last Among Advanced Economies
The Organisation for Economic Cooperation and Development (OECD) paints a grim picture for the U.K.’s economic future, predicting it will be the worst-performing developed nation in 2024. Despite signs of a global economic recovery, the forecast for the U.K. remains downbeat, with growth expected to trail all other G7 countries except Germany.
Economic Downturn in the U.K.
The U.K.’s gross domestic product (GDP) is projected to grow by a mere 0.4% in 2024, below the previous forecast of 0.7%. This sluggish growth is attributed to lingering high interest rates and inflation, which continue to dampen economic activity. The OECD predicts the British economy will expand by only 1% in 2025, falling behind other advanced economies.
Global Recovery on the Horizon
In contrast to the U.K.’s dismal outlook, the global economy is showing signs of recovery. Global growth is projected to hold steady at 3.1% in 2024, before modestly rising to 3.2% in 2025. North America is expected to lead growth among advanced nations, with the U.S. projected to have “strong growth” of 2.6% in 2024. Europe is also expected to pick up the pace after a sluggish 2024.
Cautious Optimism for Emerging Economies
The OECD notes signs of strength among emerging economies. China’s growth projections have been revised upward slightly, attributed to improved performance. However, the organization cautions that questions remain over the robustness of the global recovery, especially as central banks diverge on the future path of interest rates.
Easing Inflation and Monetary Policy Impact
The OECD believes central banks’ efforts to curb inflation are working. Real incomes are gradually recovering, supporting consumption. Headline inflation among its member nations is expected to ease to 5% in 2024 from 6.9% in 2023. By 2025, inflation is projected to align with targets of 2% in most major economies.
However, the OECD warns that if inflation remains “stickier” than expected, monetary policy may need to remain restrictive for longer.
Data sourced from: cnbc.com
