The Organisation for Economic Cooperation and Development, a global organization, predicts that the UK economy would be hit worse by the global oil crisis than the economies of other developed countries.
It predicted that the UK’s economy will contract more than that of any other G7 country in 2019.
Germany is the only other big economy that is anticipated to contract, despite dismal growth in the US and the eurozone.
In 2023, the OECD predicts a “significant growth slowdown” worldwide.
According to the OECD’s most recent report, the world economy will expand by 2.2% next year as a result of the resilience of emerging economies.
However, the OECD claimed that the economic effects of the conflict in Ukraine were uneven, with European nations bearing the brunt of the effects on trade, commerce, and the rise in energy costs.
The US, UK, Canada, France, Germany, Italy, and Japan are members of the G7. Only Germany and the UK will experience a decline, according to the OECD’s forecast, even though growth is likely to be weaker in most of the grouping.
The OECD predicts that the UK’s economy will contract by 0.4% in 2023, followed by 0.2% of meager growth in 2024.
In contrast, the UK’s Office for Budget Responsibility (OBR) estimated last week that the country will contract by 1.4% in 2019 despite forecasting a better expansion of 1.3% in 2024. According to the OBR, that would result in the largest decline in living standards in history.
The Bank of England warned earlier this month that the recession might extend for two years.
According to the OECD report, Germany’s GDP is projected to decline by 0.3%.
Only Russia, which is the target of economic sanctions and is part of the larger G20 group, is expected to perform worse than the UK.
The Energy Price Guarantee, a program to help with family and commercial energy bills, is partially to blame for the UK’s poor performance, according to the OECD, an intergovernmental organization that focuses on economic policy.
Subsidizing energy costs lowers the headline inflation rate right away, but the OECD warns that it will boost total economic demand and lead to longer-term inflationary pressures. The Bank of England would therefore be forced to increase interest rates further, increasing the cost of paying off debts.
According to the report, “better targeting of efforts to mitigate the effects of high energy prices would lower the budgetary cost, better-preserve incentives to save energy, and reduce the pressure on demand at a time of high inflation.”
target assistance
After this winter, the UK government will stop providing all citizens with assistance with their energy bills, the prime minister’s spokesman said.
After April, “we’re changing the way we handle energy support, focusing it on the most vulnerable,” he declared.
When asked about the OECD’s economic outlook, he responded, “These are difficulties that are affecting different countries at slightly different periods.”
The only OECD economy that will be smaller in 2024 than it was in 2019 is predicted to be the United States, according to Labour’s shadow chief secretary to the Treasury Pat McFadden.
The Tory doom loop is this. a downward loop of low growth that results in increased taxes, less investment, stagnant wages, and subpar public services.
Sarah Olney, a Treasury spokesperson for the Liberal Democrats, called the OECD estimate a “damning conclusion” and claimed that this year’s string of Conservative chancellors had destroyed any optimism for growth.
The UK’s inflation rate, which reached a 41-year high of 11.1% in October, is predicted to peak at the end of this year, remain above 9% in early 2023, and then decline to 4.5% by the end of the following year, according to the OECD.
The group predicts that UK interest rates will increase from their current level of 3% to 4.5% in April of next year and that the jobless rate will increase to 5% by the end of 2024.
energy assistance
In October, when households started receiving the first installment of a £400 subsidy and the reduced £2,500 energy price cap went into force, the expense of paying for assistance with energy bills became apparent on the government’s books.
These programs collectively were estimated to have cost £3.4 billion in October by the Office for National Statistics (ONS).
According to the ONS, this increased government borrowing, which is the difference between government spending and tax revenue, to £13.5 billion last month.
Despite being £4.4 billion more than the previous year, the result was less than analysts had predicted.
The ONS reported that borrowing in the current fiscal year, which runs from April to October 2022, was £84.4 billion, down from $21.7 billion during the same time the previous year.
