According to the Organization for Economic Co-operation and Development (OECD), the UK will face the worst economic performance among the G7 rich countries over the next two years, including the deepest recession next year, suffering from runaway inflation exacerbated by labor shortages. ).
The OECD expects gross domestic product (GDP) to contract by 0.4% next year after rising 4.4% this year, according to the latest forecast released on Tuesday. For 2024, the OECD, which unites the most industrialized countries in the world, predicts growth in the United Kingdom by 0.2%.
However, the organization is more optimistic than OBR, the UK’s budget forecasting body, which expects -1.4% next year. The Bank of England is even more pessimistic and expects a contraction of 1.5% next year and then another 1% in 2024.
Britain’s woes
While the UK is less dependent on interruptions in Russian hydrocarbon supplies than other countries, its energy mix is still heavily dependent on gas, which has risen in price over the year.
The country is also suffering from a severe labor shortage, in part due to an increase in cases of chronic diseases that are reducing the active population, as well as due to Brexit, which makes it difficult to hire European workers. More and more business leaders, such as British clothing giant Next or Manchester Airport, are criticizing the impact of leaving the European Union on immigration and therefore on the job market.
On Monday, the head of the CBI, the main employers’ organization, asked the government to ease immigration rules to allow for more foreign workers, saying the country lacks weapons to meet the needs.
Galloping inflation
Inflation is currently above 11% in the UK and is expected to gradually ease to 2.7% by the end of 2024, the OECD predicts. The organization also criticizes the fact that London’s electricity bill assistance for Britons is not sufficiently targeted to those most in need. The huge spending generated will “fuel inflation”, which “requires more monetary tightening” and therefore risks further affecting activity, the OECD says.
Thus, according to the organization, the Bank of England, which regularly raised the key rate for several months to counter rising prices, should raise it to 4.5% by the second quarter of 2023.
Under the G7, Germany should record growth of 1.8% this year, then a contraction of 0.3% next year, almost as strong as in the English Channel, before recovering 1.5%, according to the OECD. % in 2024. By comparison, in the US, growth should be 1.8% this year, then 0.5% next year, and 1% in 2024.
Source: Le Parisien
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