AUS
NZ
UK
CA
USA
FRA
GER
ESP
ITA
NLD
PRT
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GRC
IND
POL
BRA
ZAF
RUS
CHN
UAE
Summary
- The UK economy to clock a GDP growth rate of 7.2 per cent while the global economy to grow by 5.8 per cent this year.
- However, the British economy might suffer more longer-term damage as compared to other G7 economies, as the impact of leaving the European Union would add to the repercussions of the pandemic.
- The economic growth is likely to be uneven across individual nations due to the emergence of new virus variants and differing progress of vaccination programme across economies.
Organisation for Economic Co-operation and Development (OECD), the leading global agency has said on Monday, 31 May, that the British economy is expected to grow at 7.2 per cent this year, up from its earlier projection of 5.1 per cent. OECD has also raised its forecast for the global economic growth to 5.8 per cent this year in its 2021 Economic Outlook, up from its last prediction of 4.2 per cent. The US is predicted to be growing at a rate of 7 per cent while the European Union is expected to grow by 4.25 per cent this year, said the report.
The leading FTSE 100 index at the London Stock Exchange, which closed 0.04 per cent higher at 7,022.61 points on Monday, has maintained the momentum and opened 0.41 per cent higher at 7,051.66 in the early trading hours on Tuesday, 1 June.
Britain’s vaccine rollout plan and the government's job support schemes have contributed positively to the strong OECD forecast for the UK economy, said Rishi Sunak, Chancellor, UK Exchequer.
The OECD represents 38 nation around the world. Its member nations collectively account for roughly 60 per cent of international gross domestic product (GDP).
Also Read: Bank of England Sees UK’s Economic Growth At 7.25% In 2021
Long-term forecast for the UK
The Paris-based think tank has warned that the British economy might suffer more longer-term damage as compared to other G7 economies, as the impact of leaving the European Union would add to the repercussions of the pandemic.
The OECD said that the UK could see a fall in national output by 0.5 per cent every year due to the coronavirus crisis, the biggest decline amongst G-7 nations. Further, it said that foreign trade could shrink due to higher border costs following Brexit.
Also Read: Savings, Govt. Spending To Fuel US Economic Boom In 2023: JP Morgan
Uneven growth across the globe
Laurence Boone, chief economist, OECD, said that while on the whole, the global economy is expected to perform well this year, the growth is likely to be uneven across individual nations. The main reason for this is the emergence of new coronavirus variants, she said. Moreover, the success of the vaccination program, especially in the emerging nations, will also be a major determinant of the overall rate of recovery, added Boone.
While many advanced nations were re-opening for business driven by their successful vaccination programs, many emerging nations like India were held back due to slow vaccination deployment as well as new coronavirus breakouts, she explained.
The global think tank has also warned that the mean living standards for some people might not come back to pre-Covid levels for a long period of time. Unless a majority of the world population gets vaccinated, everyone remained vulnerable to the new Covid-19 variants, insisted Boone.
To keep up the growth momentum in advanced nations, the OECD has suggested that their central banks should retain relaxed financial conditions and allow for an inflation rate overshooting its target if needed. The international organisation also said that financial markets across the globe were at a higher risk of volatility and changes in interest rates.
Also Read: Are Investors Staring at Another Stock Market Crash?
