OECD raises UK growth forecast for 2024

The Organisation for Economic Cooperation and Development (OECD) revised its forecast for the UK economy on Wednesday, projecting faster growth than Japan, Italy, and Germany this year.

It said the UK was now expected to rank joint second among G7 nations, behind only the United States, in terms of economic growth.

Despite the upgrade, however, the UK was anticipated to experience the highest inflation rate among the group.

The OECD raised its growth forecast for the UK in 2024 to 1.1% - a significant increase from the 0.4% predicted in May, after the country recovered from a mild recession at the end of 2022.

Its forecast for 2025 remained at 1.2%.

The UK’s improved outlook was put down to stronger-than-expected consumer spending driven by rising wages and lower inflation, although business investment remained subdued.

However, the positive growth outlook was tempered by concerns over inflation.

The UK's inflation rate, which was 2.2% in August, was expected to average 2.7% throughout 2024 and remain at 2.4% in 2025 - the highest among G7 nations, according to the Guardian.

That could pose challenges for households already grappling with the rising cost of living.

Globally, the OECD believed the economy was stabilising after the shocks of the Covid-19 pandemic and Russia’s invasion of Ukraine.

Lower inflation and reduced borrowing costs were expected to support economic momentum in most major economies.

Nonetheless, the OECD cautioned against increasing government borrowing to manage deficits, warning that high debt levels could strain public finances and limit spending on essential services.

The organisation also highlighted disparities in economic recovery, with Germany notably struggling due to high food prices and a significant lag in wage growth compared to other developed economies.

In contrast, UK workers had seen wage growth outpace inflation, boosting real incomes.

Reporting by Josh White for Sharecast.com.