British Queen celebrates


The Organisation for Economic Co-operation and Development (OECD) has issued a new forecast indicating that the UK is projected to experience the highest inflation rate

among the G7 economies. According to the OECD, UK inflation is expected to reach 7.2%, surpassing its previous forecast of 6.9% in June. This inflation rate is set to become the fastest-growing among both the G7 and G20 nations.

Furthermore, economists have slightly revised down their growth forecast for the UK in the coming year due to increased interest rates. Despite better-than-expected global economic growth at the beginning of the year, it is anticipated to moderate due to the impact of higher borrowing costs, which many countries have introduced to combat inflation.

In the previous year, the UK saw inflation average at 9.1%, with a peak of 11.1%. Prime Minister Rishi Sunak and Chancellor Jeremy Hunt are under pressure to fulfill their promise to halve inflation by the year-end.

The latest forecasts also predict a 2.9% inflation rate for 2024, representing a 0.1 percentage point increase from the previous estimate. The OECD anticipates that inflation across the G20 will be 6% for 2023, down by 0.1 percentage point from its prior forecast, and 4.8% for 2024, up by 0.1 percentage point.

The report acknowledges the risk of inflation decreasing faster than expected, citing the impact of interest rate hikes on consumer spending and reduced activity in China. Despite these economic challenges, the OECD maintains its forecast of 0.3% UK growth for 2023, which is among the lowest in the G7 and G20 countries. The OECD also predicts UK GDP will grow by 0.8% in the following year, representing a 0.2 percentage point decrease from previous forecasts and placing it among the countries with the weakest growth rates in both G7 and G20. The report attributes this decline to weakened activity in the euro area and the UK, primarily due to the effects of the significant energy price shock in 2022 and the prevalence of bank-based finance in many European economies. Photo by The White House, Wikimedia commons.