OECD stated that the global economy is improving.
According to the Organisation for Economic Cooperation and Development (OECD), the global economy is turning a corner. This has helped in the improvement and upgrading of the UK’s economy. OECD forecasts the growth of the economy to be faster than that of Japan, Germany and Italy this year.
Britain was ranked joint second among the G7 developed countries in the latest outlook for the world economy by OECD. Nonetheless, the expectation from the UK to have the highest inflation in the group remains the same.
As the nation emerged from a slight recession at the end of the previous year, it characterised the growth of the British economy as “robust”, raising the estimate for 2024 to 1.1% from a prediction of 0.4% published in May. The 1.2% growth prediction for 2025 was left in place.
Among the other nations in the bloc, the UK recorded to be the last in the May forecast. Although at present it is said to be on the same level as France and Canada but behind the US.
However, rising costs are anticipated to continue to be a headwind for Britons, with inflation expected to reach 2.7% by 2024 from 2.2% in August. UK inflation is expected to remain at 2.4% in 2025, climbing at the quickest rate in the G7.
To sum it all, OECD stated that the global economy is improving. Lower inflation and lower borrowing costs by central banks would help most major economies maintain their “ongoing momentum”. With the after effects of the COVID-19 pandemic and the impact of Russia’s invasion on Ukraine, these conditions will allow the global economy to return back to health.
Alvaro Pereira who is the chief economist of the OECD said that the strength of the UK’s recovery this year after last year’s recession surprised him.
Among the pessimistic economic forecasters, the paris-based organisation made a judgement in May that weak business investment and lower consumer spending would pull down Britain’s economy and growth.
The rising wages and low inflation surged consumer spending way more than what was expected despite the business investment remaining low.
Similar to most European countries, Uk was also in the same situation as them where the country needed to put restrictions on debt levels. “Not by introducing draconian austerity”, said Pereira. He also stated that fiscal prudence is necessary.
As peer reports by OECD the global trade is seen to be returning to the same levels as before the pandemic at a much faster pace than anticipated. This was unexpected especially when the shipping companies found ways to avoid the Red Sea.
Meanwhile, lower inflation meant that real incomes increased and consumer spending rebounded in many countries. However, the OECD reported that Asian ports were struggling to handle ships forced to take longer routes, driving container costs up by 160% since last year.
Food prices that were stuck at much higher levels which resulted in the reduced spending power of the people on low incomes. The struggling economy of Germany was affected the worst by the increase in food prices. Since 2019, the biggest economy of Europe suffered from a 16% increase in food prices above the average wage growth when compared with a gap below 4% in Australia.
In the event that interest rates stay high, the OECD fears that governments may try to lower their spending deficits by taking on more debt at massive expense.
Most prominent economists worldwide expressed concern about the amount of government debt growing, according to a separate poll that the World Economic Forum released on Wednesday.
Over 50% expressed their concern that excessive public debt will hinder efforts to stimulate economic growth, jeopardise financial stability, or restrict government resources for anticipating the next economic downturn.