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Highlights:
UK Growth Upgraded: The OECD revised the UK's growth outlook for next year, placing it joint second among G7 nations, just behind the US.
Global Economy Strengthens: The world economy is expected to grow more than previously anticipated, as key economic challenges ease.
UK Inflation Risks: Rising inflation in the UK could challenge economic momentum, with price pressures projected to exceed those of other G7 countries.
Economic growth in the UK is expected to surpass earlier projections, placing it joint second among G7 developed nations, according to the latest outlook from the Organisation for Economic Cooperation and Development (OECD). The only G7 country forecasted to outperform the UK is the United States.
In its updated forecast, the OECD revised the UK's expected growth for 2024 to 1.1%, a significant increase from its previous estimate of 0.4%. This adjustment brings the UK in line with Canada and France, and positions it ahead of Japan, Italy, and Germany, which were previously forecasted to outperform the UK. The new figures represent a notable shift from the May projections when the UK was expected to lag behind all its G7 counterparts.
On a global scale, the world economy is anticipated to grow by 3.2% in 2024, slightly higher than the OECD's previous forecast of 3.1%. The organisation observed that key economic challenges are gradually easing, leading to more optimistic growth projections. “A corner has been turned,” the OECD noted in its report.
The organisation highlighted that declining consumer price inflation has played a role in supporting household spending, helping to offset some of the negative effects of restrictive financial conditions and geopolitical uncertainties. These include the ongoing war in Ukraine and recent conflicts in the Middle East, which continue to influence global economic stability.
Among G7 nations, Japan and Germany saw their growth forecasts downgraded, with Japan expected to contract by 0.1% and Germany projected to grow by a marginal 0.1%. Germany, in particular, has been affected by lacklustre industrial output and a decline in overall economic sentiment, contributing to the weaker forecast.
Despite the upward revision in growth, the UK is anticipated to face challenges, particularly from rising inflation. The OECD projects that UK inflation will climb to 2.7% by the end of 2024, with inflationary pressures expected to outpace the rest of the G7 in 2025. This could create headwinds for the economy as higher prices may impact consumer spending and overall economic momentum.
As the global economy navigates both improving conditions and persistent risks, the UK's revised growth outlook underscores a better-than-anticipated performance, while inflation remains a challenge that could influence future economic stability.
