The UK is facing the worst downturn of major economies next year and is set for a recession which much of the rest of the world will avoid, according to a new report from the Organisation for Economic Co-operation and Development (OECD).
The global economic thinktank sharply downgraded its forecasts for the UK economy, predicting it will shrink by 0.4 per cent in 2023 and grow by just 0.2 per cent in 2024. As recently as September, it was expecting GDP to flatline next year.
The OECD blamed worker shortages and “untargeted” energy support for painful inflation, forecast to peak at the end of this year around its current level of 11.1 per cent and remain above 9 per cent into early 2023, before slowing to 4.5 per cent by the end of next year and 2.7 per cent in 2024.
Its report sees UK interest rates rising further from 3 per cent currently to 4.5 per cent by April next year, while unemployment will lift from 3.6 per cent to 5 per cent by the end of 2024.
Among the G7 group of most developed nations, only Germany is expected to join the UK in seeing a contraction in national income next year, with GDP falling by 0.3 per cent.
By contrast, the the United States will enjoy an expansion of 0.5 per cent, with GDP set to rise by 0.6 per cent in France, 1 per cent in Canada and 1.8 per cent in Japan.
And the OECD said that much of the rest of the world will dodge the recession which the Bank of England and Office for Budget Responsibility expect to stretch into 2024 in the UK.
OECD interim chief economist Alvaro Santos Pereira said the world was currently facing “a very difficult economic outlook”.
But he added: “Our central scenario is not a global recession, but a significant growth slowdown for the world economy in 2023, as well as still high, albeit declining, inflation in many countries.”
Labour Treasury spokesperson Abena Oppong-Asare said: “That Britain’s economy will suffer the biggest hit from energy crisis among G7 nations is a direct result 12 years of Tory failures on both our energy and our economic security.
“They’ve failed to secure our economy and get it growing which has left us exposed to any external shocks.
“They haven’t delivered on the renewables or nuclear we need for energy independence, they cut our gas storage and they didn’t regulate the market leading to companies going bust and families footing the bill.”