The UK growth rate will be at 1%, just behind Germany at 1.1%
The Organisation for Economic Cooperation and Development reported that the UK will be the worst-performing economy among the G7 nations the next year. The growth rates of the country were affected by sky-high inflation and high-interest rates last year.
In 2025, the UK is predicted to fall to the bottom among the list of G7 countries. The growth rate will be at 1%, just behind Germany at 1.1%. The Organisation for Economic Cooperation and Development also lowered its forecast for the UK growth this year to 0.4% from an earlier prediction of 0.7% in November. The US and Canada are on the list of the fastest-growing economies in the G7 next year, growing at a rate of 1.8%.
The OECD predicted that ongoing price increases in the services sector and a lack of qualified workers would slow Britain’s growth rate and delay the estimated reduction in interest rates.
The think tank believes that due to concerns that price increases may pick up, the Bank of England will postpone its initial interest rate drop from 5.25% until the fall.
The evaluation was made in the wake of a more upbeat assessment of the world economy, which the OECD claimed was strengthening despite the possibility of escalating hostilities in the Middle East and Ukraine.
“There are some signs that the global outlook has started to brighten, even though growth remains modest,” it said in a half-yearly health check.
In 2024, global GDP growth is expected to be 3.1%, which is the same as in 2023. In 2025, however, it is expected to slightly rise to 3.2%, helped by higher household income growth and lower interest rates. Growth rates in France and Germany were likewise downsized while the US economy has advanced rapidly as per the OECD.
This year, Germany was predicted to grow by 0.2 percent, down from 0.6 percent the previous year, and France was predicted to grow by 0.7 percent, down from 0.8 percent in November. A recuperation is normal in the eurozone while development moderates in the US, India and other emerging market economies.
Annual consumer price inflation in the G20 economies – which incorporates the UK, Saudi Arabia, Brazil, France, and Mexico – is projected to ease step by step, helped by blurring cost pressures, declining to 3.6% in 2025 from 5.9% in 2024.
According to the report, by the end of 2025, inflation is projected to be back on target in most major economies. States addressing a significant part of the world’s output are supposed to keep a firm grasp on spending, even as interest rates decline, permitting the impact of cheaper money as opposed to public spending to facilitate the cost-of-living crisis faced by low and middle-income countries.
OECD mentioned to Chancellor Jeremy Hunt that they should remain cautious and focus more on improving productivity and public investment.
Any relaxing of the public satchel strings ought to happen solely after interest rates have fallen back, it said, foreseeing that the Bank of England will diminish the cost of borrowing from 5.25% to 3.75% toward the following year’s end.
According to the report, spending is to be directed towards supply-enhancing investment, including infrastructure, the National Health Service, and adult skills as inflation remains above target. “Fiscal prudence is required as inflation remains above target.”
Proceeding with the childcare reform will assist in combating economic inactivity, but contingent planning to address potential bottlenecks, particularly likely staff shortages, is required.
It added that the government’s spending deficit would decrease from 4.6 percent this year to 3.5 percent next year as a result of cuts to Whitehall budgets already in the works.
Jeremy Hunt mentioned that this estimate isn’t especially shocking given their need for the last year has been to handle inflation with higher interest rates.
“But now we are winning that war, growth matters which is why it is significant that last month the IMF predicted the UK will grow faster over the next six years than any European G7 country or Japan. To sustain that we need to stick to our plan – competitive taxes, a flexible labour market, and far-reaching welfare reform”, he added.
A quick return in Gross Domestic Product during 2025 of 1% would be a portion of that projected by the Office for Budget Responsibility (OBR). (OBR). The OBR has estimated that the UK’s development rate will increase to 1.9% one year from now after a precarious fall in inflation and interest rates.
