A leading forecaster predicts that the UK will be the poorest performing economy among the G7 nations next year, attributing this outlook to high interest rates and restrictive fiscal policies expected to dampen growth following the general election.
The Organisation for Economic Co-operation and Development (OECD) revised its annual assessment of the economy, reducing its UK GDP growth outlook to 0.4 per cent for this year and 1 per cent for 2025. These figures mark a decline from previous projections of 0.7 per cent and 1.2 per cent growth, respectively, made in March. It said the UK would be the slowest growing economy in the G7 next year and the second-worst this year, behind Germany’s estimated growth of 0.2 per cent for this year.
The United States, the world’s largest economy, is on course to expand by 2.6 per cent this year and the wider 20-country eurozone will have average growth of 0.5 per cent of GDP in 2024, the think tank said.
The subdued forecasts, which fall below estimates from both the International Monetary Fund and the Office for Budget Responsibility, highlight the challenging fiscal landscape confronting Jeremy Hunt, the chancellor, and Rachel Reeves, the shadow chancellor, as the general election approaches.
The OECD said the UK’s restrictive fiscal policy, marked by high personal income taxes and constrained government spending, would limit economic growth over the next two years. It noted that a moderate economic recovery in 2023 was driven in part by “exceptionally large migration inflows”, which both parties have said they want to drastically reduce in the coming years.
