The United Kingdom is poised to experience the slowest economic growth among all advanced nations next year, as reported by the Organization for Economic Cooperation and Development (OECD). This gloomy outlook for the UK contrasts starkly with a broader global economic recovery, where growth is expected to stabilize at 3.1% in 2024 and slightly increase to 3.2% in 2025.
According to the latest OECD forecasts, the UK’s Gross Domestic Product (GDP) is projected to grow by a mere 0.4% in 2024, a downgrade from earlier predictions of 0.7%. This places the UK’s performance behind that of all other G7 nations, except for Germany, which is anticipated to see a growth rate of 0.2%. The British economy is expected to make a modest recovery in 2025 with a growth rate of 1%, still lagging behind its peers such as Canada, France, Germany, Japan, and the United States.
This underwhelming performance can be attributed to the lingering impacts of high interest rates and persistent inflation, which continue to dampen economic activity. Alvaro Pereira, director of the OECD’s policy studies branch, highlighted the effectiveness of central banks’ strategies to curb inflation, noting, “Monetary policy is doing what it should be doing. Real incomes are starting to recover, which will help consumption. We also think inflation is starting to come down.”
The OECD’s outlook suggests that while there is a recovery underway in many parts of the world, the path forward remains fraught with uncertainties, especially regarding the robustness of the recovery and the future trajectory of interest rates. Central banks may need to maintain restrictive monetary policies longer than anticipated if inflation proves more persistent.
Globally, North America is expected to lead growth among advanced economies next year, with the U.S. projected to expand by 2.6% in 2024. European growth is also expected to pick up after a sluggish year. Among emerging economies, China shows signs of strength, with revised growth projections reflecting a stronger performance than previously anticipated, partly due to a slight improvement in its troubled property market.
The OECD has also provided an update on global inflation trends, projecting that inflation among its 38 member nations will decrease to 5% in 2024 from 6.9% in 2023, and further reduce to 3.4% in 2025. By the end of 2025, inflation rates are expected to stabilize at around 2% across most major economies.
This forecast underscores the delicate balance policymakers must maintain between fostering economic growth and controlling inflation, a challenge that will define the economic landscape in the years to come. As countries navigate these complex dynamics, the UK’s particularly sluggish growth serves as a stark reminder of the varied pace of recovery across different global regions.