The UK’s economy is growing more slowly than expected in 2022 and will grind to a halt next year, the Organisation for Economic Co-operation and Development (OECD) has predicted.
The international organisation projected that UK GDP (gross domestic product) will grow by 3.64 percent this year, a significant downgrade from the 4.75 percent growth it forecast in December 2021.
It said UK growth will stagnate in 2023 due to depressed demand.
According to OECD projections, UK inflation will keep rising and peak at over 10 percent at the end of 2022 due to continuing labour and supply shortages and high energy prices, before gradually declining to 4.7 percent by the end of 2023.
OECD experts expect private consumption to slow as rising prices erode households’ income, though a tight labour market will help to keep unemployment low.
It comes alongside a global slowdown which is in large part due to the war in Ukraine.
Global growth has been downgraded from 4.46 percent to 3.02 percent. Only Argentina and Australia saw their growth projections upgraded.
“The world is paying a heavy price for Russia’s war in Ukraine. It is a humanitarian disaster, killing thousands and forcing millions from their homes,” the organisation said, adding: “The war has also triggered a cost-of-living crisis, affecting people worldwide.”
The world economy has also been affected by the COVID-19 lockdowns in China caused by the Chinese Communist Party (CCP) regime’s continuing zero-COVID policy, the organisation said.
The war in Ukraine and the lockdowns in China have “set the global economy on a course of slower growth and rising inflation—a situation not seen since the 1970s,” it said.
“Rising inflation, largely driven by steep increases in the price of energy and food, is causing hardship for low-income people and raising serious food security risks in the world’s poorest economies.”
The organisation said the UK economy is “susceptible to economic spill-over effects” from Russia’s invasion into Ukraine through rising energy prices and supply chain disruptions.
“The United Kingdom has limited direct trade and financial linkages with Russia and Ukraine, but higher global energy prices add to the squeeze on household incomes, which are now declining in real terms,” it said.
This will mean that people start consuming less than they have in the past, the OECD said, which will cause GDP growth to stagnate next year.
“Household savings will decline to below pre-pandemic levels, with some households taking on more debt to keep up with the rising cost of living,” it said.
In turn, reduced demand will mean that the need for workers eases and unemployment will gradually increase to 4.5 percent by the end of next year.
