The UK will be the worst-performing economy among the G7 next year because of lingering inflation and stubbornly high interest rates, said the Organisation for Economic Cooperation and Development on Thursday.
The Paris-based think-tank has projected that UK growth will crawl at a meagre 0.4 per cent this year as opposed to the November forecast of 0.7 per cent.
It predicted that the UK’s economy will grow by 1 per cent in 2025, just behind Germany’s 1.1 per cent, pushing the country to the bottom of the G7 growth league.
The United States and Canada lead the league, with both forecasted to be growing at 1.8 per cent next year.
The OECD said persistent inflation in the services sector, coupled with a skilled labour shortage will likely delay any expected UK interest rate cuts.
The UK voted in 2016 to exit the EU, which is considered by many economists as having contributed to workforce shortages and to increases in prices of imported goods.
It has also predicted that the Bank of England will not start cutting interest rates –- which currently sit at a 15-year high of 5.25 per cent — before the last few months of the year.
Finance minister Jeremy Hunt said: ‘This forecast is not particularly surprising given our priority for the last year has been to tackle inflation with higher interest rates.’
But Darren Jones, a finance spokesman for the main opposition Labour party, pointed the finger at Hunt and the governing Conservatives, saying the lacklustre OECD prediction was their fault.
‘The Conservatives cannot fix the economy because they are the reason it is broken,’ he added.
Barret Kupelian, chief economist at PwC UK, said: ‘The OECD’s forecasts show the UK is stuck in the ‘slow growth’ lane, when compared to other large European economies.’
