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BRITAIN’S economy is set for “sluggish” growth over the next two years, with previous forecasts likely to be missed, economists warned today.
The Organisation for Economic Co-operation and Development (OECD) downgraded its British growth projections for 2024 and 2025, indicating that growth will be the weakest in the G7 group of major economies next year.
Global gross domestic product (GDP) is expected to increase by 3.1 per cent this year, as it did in 2023.
But the economy is expected to grow much more slowly because interest rates have been raised in a bid to bring down inflation.
The OECD said: “GDP growth is projected to remain sluggish” in the face of a “waning drag from past monetary tightening.”
The economy grew by 0.1 per cent last year and is expected to see growth improve to 0.4 per cent this year, the OECD added.
This, however, represents a downgrade of previous forecasts predicting 0.7 per cent growth for 2024.
It also means that Britain is on track to record the second-weakest growth across the G7, with only Germany — which has a growth forecast of 0.2 per cent — expected to see a smaller increase.
The report also said that the economy was on track to grow by around 1 per cent next year.
This is slower than projected for all other G7 nations.
The OECD said higher wages would encourage consumer spending over the next two years but could contribute to inflationary pressure as the Bank of England continues its efforts to get consumer price index inflation down to its 2 per cent target rate.
Meanwhile, unemployment is expected to rise over the same period.
Chancellor Jeremy Hunt said the forecast was “not particularly surprising, given our priority for the last year has been to tackle inflation with higher interest rates.”
He insisted that “we need to stick to our plan — competitive taxes, a flexible labour market and far-reaching welfare reform.”
Shadow chief secretary to the Treasury Darren Jones said: “Today’s news … again reminds the British people what they already know: after 14 years of failure, the Conservatives cannot fix the economy because they are the reason it is broken.”
SNP economy spokesman Drew Hendry blamed Brexit for the poor economic outlook and claimed that Scotland achieving independence was vital for growth north of the border.
