New forecasts from the Organisation for Economic Cooperation and Development (OECD) suggest that the U.K. is poised to have the weakest economic performance among all advanced nations next year due to its “sluggish” growth prospects.
According to the OECD’s latest global economic outlook released on Thursday, the U.K.’s gross domestic product (GDP) is projected to grow by 0.4% in 2024, down from an earlier forecast of 0.7%. This growth rate is lower than that of all other G7 countries except for Germany, which is forecasted to grow by 0.2%.
The OECD predicts that the British economy will expand by 1% in 2025, trailing behind Canada, France, Germany, Japan, and the U.S. This subdued growth outlook is attributed to the lingering impact of high interest rates and inflation.
Despite the challenges faced by the U.K., the global economy is showing signs of recovery, with growth expected to remain stable at 3.1% in 2024 before edging up slightly to 3.2% in 2025.
Alvaro Pereira, director of the OECD’s policy studies branch, highlighted that North America is expected to lead growth among advanced nations next year, particularly with a forecast of 2.6% growth in the U.S. Europe is also anticipated to experience a pickup in growth after a sluggish 2024.
In emerging economies like China, the OECD noted signs of strength, with growth projections revised slightly upward due to a stronger-than-expected performance, especially amid challenges in the property market.
The OECD views the global economic outlook as an indication that central banks’ efforts to combat inflation are yielding results. Pereira noted that monetary policy is effectively contributing to the recovery, with real incomes beginning to recover and inflation showing signs of easing.
However, uncertainties persist regarding the robustness of the global recovery, particularly as central banks demonstrate divergence in their approaches to future interest rate paths. Pereira emphasized the possibility of prolonged monetary policy tightening if inflation remains persistently high.
According to the OECD, headline inflation across its 38 member nations is forecasted to decline to 5% in 2024 from 6.9% in 2023, further dropping to 3.4% in 2025. By the end of 2025, inflation is expected to align with targets of around 2% in most major economies.
