OECD says UK economy will grow faster than Japan, Italy and Germany this year | OECD

The Organisation for Economic Co-operation and Development (OECD) says the world economy is recovering and has revised its growth forecast for the UK this year upwards, faster than for Japan, Italy and Germany.

According to the OECD's latest outlook for the world economy, the UK ranks joint second among the G7 advanced economies. However, the UK is still expected to have the highest inflation rate in the group.

Describing UK economic growth as robust, it revised up its 2024 figure to 1.1% from its May forecast of 0.4% as the country recovers from a mild recession late last year. It maintained its forecast for 1.2% growth in 2025.

In the May forecast, the UK lagged behind all other countries in the bloc. It is now level with Canada and France, but behind the US.

However, Britons are still expected to face headwinds from rising prices, with inflation set to rise to 2.7% in 2024 from 2.2% in August. Inflation in the UK is also forecast to remain at 2.4% in 2025, the fastest pace among the G7 countries.

The OECD said that the global economy is at a turning point overall. Lower inflation and lower central bank borrowing costs will sustain momentum in most major economies. These conditions will allow the global economy to recover from the shocks of the coronavirus pandemic and Russia’s invasion of Ukraine.

OECD chief economist Alvaro Pereira said he was surprised by Britain's recovery early this year after last year's recession.

The Paris-based organisation judged in May that low consumer spending and weak business investment would hamper UK growth, making it one of the most pessimistic economic forecasts ever issued.

Business investment remains low, but consumer spending has grown more than expected, driven by rising wages and low inflation.

Pereira said Britain was in a similar situation to many European countries in need of a cap on debt levels. He said fiscal prudence was needed, not austerity measures.

The OECD reported that world trade is recovering to pre-pandemic levels faster than expected after shipping companies found ways to avoid the Red Sea.

Meanwhile, weak inflation meant real incomes were rising and consumer spending was picking up in many countries. But the OECD said Asian ports were struggling to accommodate vessels that had to take longer routes, and container costs had risen 160% since last year.

Food prices have also remained at much higher levels, reducing the purchasing power of low-income earners. Struggling Germany has been one of the countries hit hardest by rising food prices. In Europe’s largest economy, food prices have risen by 16% since 2019, compared to less than 4% in Australia.

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The OECD is concerned that with interest rates high, governments will have to borrow heavily to reduce their spending deficits.

The bigger the debt, the more it takes to pay interest, which means less money for health, education and growth, Pereira said.

A separate survey of the world's top economists released Wednesday by the World Economic Forum found that a majority are concerned about rising levels of government debt.

More than half said they were concerned that high public debt would hamper efforts to stimulate growth, pose risks to financial stability or limit the resources available to governments to prepare for the next economic crisis.

Commenting on the OECD findings, UK Chancellor of the Exchequer Rachel Reeves said: “While the acceleration in economic growth is welcome, we know there is still much work to be done, so this government’s top priority is to make economic growth happen.

Next month's Budget will be used to fix the foundations so we can deliver on our promise of change and rebuild Britain.

Sources 1/ https://Google.com/ 2/ https://www.theguardian.com/business/2024/sep/25/uk-economy-to-grow-faster-than-japan-italy-and-germany-this-year-says-oecd The mention sources can contact us to remove/changing this article

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