UK will be worst performer in G7 next year, OECD forecasts
UK will be worst performer in G7 next year, OECD forecasts The Guardian
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The UK Predicted to be Worst-Performing Economy in the G7
According to the Organisation for Economic Cooperation and Development (OECD), the UK will be the worst-performing economy in the G7 next year. This is due to high interest rates and the lingering effects of last year’s surge in inflation, which are dragging down growth.
Downgraded Growth Forecast for the UK
In a downbeat assessment, the Paris-based thinktank also downgraded its forecast for UK growth this year to 0.4% from a November forecast of 0.7%.
Future Growth Predictions
The OECD predicts that the UK will fall to the bottom of the G7 growth league in 2025, with growth of 1%, just behind Germany at 1.1%. The fastest growing economies in the G7 next year are expected to be the US and Canada, both growing at 1.8%.
Factors Affecting UK Growth
The OECD states that Britain’s growth rate will be dampened by persistent price rises in the services sector and shortages of skilled staff, which will delay expected cuts in interest rates.
The thinktank expects the Bank of England to delay the first cut in interest rates from 5.25% until the autumn due to fears of a rebound in price growth.
Global Economic Outlook
Despite the threat of worsening conflicts in Ukraine and the Middle East, the OECD provides a more optimistic outlook for the global economy, stating that it is gaining strength.
Global GDP growth is projected to be 3.1% in 2024, unchanged from 2023, before edging up to 3.2% in 2025. This growth will be supported by stronger growth in household incomes and lower interest rates.
Other Downgraded Growth Forecasts
The OECD also downgraded growth forecasts for France and Germany, while the US economy has accelerated.
Germany’s growth forecast for this year was reduced to 0.2% from the previous forecast of 0.6%, while France’s growth forecast was reduced to 0.7% from 0.8%.
A recovery is expected in the eurozone, while growth moderates in the US, India, and other emerging-market economies.
Inflation and Government Spending
Annual consumer price inflation in the G20 economies is projected to ease gradually, declining to 3.6% in 2025 from 5.9% in 2024.
The OECD warns that governments should keep a tight rein on spending, even as interest rates begin to decline. It suggests that the effect of cheaper money, rather than public spending, should be used to ease the cost of living crisis facing low- and middle-income groups.
OECD’s Recommendations for the UK
The OECD advises the UK government to remain prudent and focus on productivity-enhancing public investment. It suggests that any loosening of the public purse strings should happen only after interest rates have fallen back.
The report also highlights the importance of supply-enhancing investment, including infrastructure, the National Health Service, and adult skills. It emphasizes the need for contingency planning to address potential bottlenecks, such as likely staff shortages in the childcare sector.
Cuts to Whitehall budgets are expected to reduce the government’s spending deficit from 4.6% this year to 3.5% next year.
UK Government’s Response
Chancellor Jeremy Hunt acknowledges the forecast but highlights that the UK has been prioritizing tackling inflation with higher interest rates. He emphasizes the importance of growth and states that the IMF has predicted that the UK will grow faster than any European G7 country or Japan over the next six years. He reiterates the need to stick to the government’s plan, which includes competitive taxes, a flexible labor market, and welfare reform.
Contrasting Forecasts
The OECD’s prediction of a 1% bounce back in GDP during 2025 is half that projected by the Office for Budget Responsibility (OBR), the Treasury’s independent forecaster. The OBR forecasts a growth rate of 1.9% next year after a steep fall in interest rates and inflation.
SDGs, Targets, and Indicators
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SDG 8: Decent Work and Economic Growth
- Target 8.1: Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7% GDP growth per annum in the least developed countries
- Indicator 8.1.1: Annual growth rate of real GDP per capita
-
SDG 10: Reduced Inequalities
- Target 10.1: By 2030, progressively achieve and sustain income growth of the bottom 40% of the population at a rate higher than the national average
- Indicator 10.1.1: Growth rates of household expenditure or income per capita among the bottom 40% of the population and the total population
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SDG 12: Responsible Consumption and Production
- Target 12.2: By 2030, achieve the sustainable management and efficient use of natural resources
- Indicator 12.2.1: Material footprint, material footprint per capita, and material footprint per GDP
Analysis
The article highlights several issues related to the UK’s economy and global economic growth. Based on this information, the following SDGs, targets, and indicators can be identified:
1. SDG 8: Decent Work and Economic Growth
The article discusses the UK’s economic performance and growth prospects. The UK is predicted to be the worst-performing economy in the G7 next year, with a growth rate of only 0.4% this year. This relates to SDG 8, which aims to promote sustained, inclusive, and sustainable economic growth, full and productive employment, and decent work for all. The low growth rate in the UK indicates a need for policies and measures to stimulate economic growth and create more job opportunities.
2. SDG 10: Reduced Inequalities
The article mentions the impact of persistent price rises in the services sector and shortages of skilled staff on the UK’s growth rate. These factors can contribute to income inequalities and hinder the progress towards reducing inequalities. SDG 10 aims to reduce inequalities within and among countries. The issues highlighted in the article emphasize the need for policies that address income disparities and ensure inclusive economic growth.
3. SDG 12: Responsible Consumption and Production
The article mentions the need for sustainable management and efficient use of natural resources. This relates to SDG 12, which aims to ensure sustainable consumption and production patterns. The article highlights the importance of managing resources effectively to achieve economic growth while minimizing environmental impacts.
Table: SDGs, Targets, and Indicators
| SDGs | Targets | Indicators |
|---|---|---|
| SDG 8: Decent Work and Economic Growth | Target 8.1: Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7% GDP growth per annum in the least developed countries | Indicator 8.1.1: Annual growth rate of real GDP per capita |
| SDG 10: Reduced Inequalities | Target 10.1: By 2030, progressively achieve and sustain income growth of the bottom 40% of the population at a rate higher than the national average | Indicator 10.1.1: Growth rates of household expenditure or income per capita among the bottom 40% of the population and the total population |
| SDG 12: Responsible Consumption and Production | Target 12.2: By 2030, achieve the sustainable management and efficient use of natural resources | Indicator 12.2.1: Material footprint, material footprint per capita, and material footprint per GDP |
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Fuente: theguardian.com
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