According to new forecasts from the Organization for Economic Co-operation and Development (OECD), inflation in Britain will be higher than before next year while growth rates will be lower.
In their latest interim outlook, OECD economists expect UK inflation to average 7.2 per cent in 2023, up from their June forecast of 6.9 per cent.
Among G20 countries, only Argentina, where inflation is projected to exceed 118 percent, and Turkey, where it is expected to exceed 52 percent, will have higher levels of price increases.
Inflation next year is forecast to fall to 2.9 percent, slightly below the eurozone, but 0.1 percent higher than the OECD predicted earlier in June.
Inflation in Britain has fallen to 6.8 percent after reaching a peak of more than 11 percent last year. However, it has proved more stubborn than many economists had predicted, with concerns growing that it is becoming increasingly embedded in the economy.
In response, interest rates have risen to the highest level since the financial crisis at 5.25 per cent, with the market expecting a further rate hike tomorrow.
This has resulted in slowing growth in the UK. In 2023, growth in the UK is expected to average just 0.3 per cent, rising to 0.8 per cent the following year. In June, Britain was projected to grow at 1.0 percent next year.
“Activity in the euro zone and the United Kingdom has already weakened, reflecting the lower impact on earnings from a large energy price shock in 2022 and the relative importance of bank-based finance in many European economies,” the report said.
The gloomy forecasts for the UK reflect a worsening global growth picture. The OECD said advanced economies grew faster than expected at the start of the year, but it now expects global growth to slow next year.
“The impact of tight monetary policy is becoming increasingly visible, with business and consumer confidence declining and the rebound in China fading,” the report said.
The growth rate in G20 countries is estimated to be three percent in 2023, which will fall to 2.7 percent next year. US growth in particular is expected to moderate, falling from 2.2 percent in 2023 to 1.3 percent next year.
Concerns about the persistence of inflation and the impact of interest rate hikes mean “risks are tilted to the downside”.
The organization said that revitalizing global trade is an important way to boost growth. In the context of the rise of protectionism, it states that “concerns about economic security should not prevent us from taking advantage of opportunities to reduce trade barriers”.
Source: www.cityam.com
