The UK's economic outlook has worsened due to persistent inflation in some sectors despite the global growth outlook brightening, according to the latest forecasts from the Organisation for Economic Cooperation and Development (OECD).
UK growth is forecast to grow only 0.4% this year, down from November’s forecast of 0.7%, potentially making it the worst-performing economy in the G7 next year.
A rebound of 1% growth is projected for 2025, which is well below the global growth forecast and slower than the latest forecast from the UK's Office for Budget Responsibility, which projects 0.8% growth this year and 1.9% in 2025.
While overall inflation is continuing to moderate, the OECD expects Britain’s growth rate to be dampened by persistent price rises in the services sector and shortages of skilled staff pushing up wages in many sectors.
On a global view, growth of 3.1% is forecast for 2024, inching up to 3.2% next year, the twice-yearly economic health check predicted, amidst "signs that the global outlook has started to brighten, though growth remains modest".
Tighter central bank conditions continue to impact housing and credit markets, the report said, but global activity is "proving relatively resilient, inflation is falling faster than initially projected and private sector confidence is improving".
"Supply and demand imbalances in labour markets are easing, with unemployment remaining at or close to record lows. Real incomes have begun to improve as inflation moderates and trade growth has turned positive."
Softer outcomes are now seen in many advanced economies, especially in Europe, offset by strong growth in the United States and many emerging market economies.
For the US, real GDP is projected to grow 2.6% in 2024 and 1.8% in 2025.
After a strong 2023, growth is expected to be fairly robust and the fiscal deficit "will remain large but tighten modestly".
The OECD expects the Fed to begin monetary policy easing in the second half, though a delay to rate cuts is one of the "downside risks" to the growth forecast, as well as the imposition of additional trade restrictions (presumably following the presidential election).
The fastest growth is forecast for India, Indonesia, China and Turkiye.