UK economy set for highest inflation and near to slowest growth of G7 countries
The UK economy will see the highest inflation rate and nearly the slowest growth of the group of seven (G7) advanced economies this year, according to new analysis.
Inflation in Britain is forecast to average at 6.9% for 2023, the Organisation for Economic Co-operation and Development (OECD) found.
Clare Lombardelli, Chief Economist at OECDs, said: “Inflation in the UK is higher and proving to be higher than other countries at the moment.”
🌍 The @OECD Economic Outlook is now available
You can check out the key messages here 👇https://t.co/o5jD0uL4vP
— UK Delegation OECD (@UKOECD) June 7, 2023
She said this was partly due to high labour costs as wages rise, and the fact that Britain is more exposed to high global energy prices.
“In our projections it is expected to see faster fall in inflation, which is set to return in 2024 towards target”, she added, with the rate set to drop sharply to average 2.6% next year.
The economy will just about eke out growth this year with a recession no longer in the immediate outlook.
The OECD expects gross domestic product (GDP) to edge up by 0.3% in 2023 before improving moderately to 1% growth in 2024.
It is an upgrade from the previous report in March, which had estimated GDP would fall by 0.2% this year.
Only Germany, which fell into a recession over the start of the year and is set to stagnate throughout 2023, will perform worse than the UK, according to the new projections.
In contrast, as the best performer in the G7, the US is set for growth of 1.6% this year, while inflation will ease to a significantly lower 3.9%.
“The global economy is turning a corner but faces a long road ahead to attain strong and sustainable growth”, Lombardelli added.
Falling energy prices and headline inflation, easing supply bottlenecks and the reopening of China’s economy, and strong employment and relatively resilient household finances have all contributed to a projected recovery, she said.
Responding to the outlook, UK Chancellor Jeremy Hunt 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.”