The UK economy will grow at a slower pace than any other developed or developing country this year, according to the Organization for Economic Cooperation and Development (OECD). The organization raised its growth forecast for the United Kingdom’s economy to 1.3% in 2018, with a rising global recovery from the earlier forecast for 1.2%. However, growth remains the weakest among the G20 countries.
For this year, the OECD forecasts the fastest global economic growth since 2011, helped by tax and spending cuts in the US and Germany. The Paris-based organization said the world economy is about to expand at an annual rate of 3.9% in the next two years. This represents an increase in the forecast compared to November 2007 for growth of 3.7% in 2018 and 3.6% in 2019.
However, the report warns that recovery may be undermined by increasing trade barriers that would hurt growth and jobs. According to the OECD, the higher inflation in the UK will continue to shrink household incomes. Poor business investment will also have a bearing on growth over the next two years amid the uncertainty surrounding the Brexit talks.
The OECD left its growth forecast unchanged in the United Kingdom in 2019 at a level of 1.1%. This would be the slowest growth among the countries in organization, along with Japan.
Alvaro Pereira, the chief economist at the OECD, has called on the UK to introduce more policies to raise living standards and to address regional disparities in the country. “We believe it is very important for the UK to invest more in infrastructure to boost productivity”, said he. “Many investments are being made in London, but not in other cities in the country. More needs to be done to boost productivity in the rest of the UK”, added the economist.
The latest economy expectations of OECD show that the economy of only one G20 – Russia is expected to grow faster this year than forecast in November. According to Pereira, global growth will be supported by the recovery of investment, with an expected increase in trade volume of 5.2% in 2017 to continue in 2018.
“Investments are coming back, so it’s a good news for jobs and growth in economies”, said the chief economist at the OECD.
The organization, however, warned that trade barriers pose a threat to growth, and that the global trade war would be damaging to the world economy.