The Organisation for Economic Cooperation and Development (OECD) has forecasted that the UK economy, apart from Russia, will be the sole industrialised country to shrink in 2023, even though increasing consumer confidence will result in a “substantial” rebound in activity this year.
The OECD expects a contraction of 0.2% in the UK economy for the year. While this is an improvement from the 0.4% contraction it had projected a few months earlier, it still places the UK at the bottom of the G7 table and significantly behind the US and Japan, which are anticipated to grow by 1.5% and 1.4%, respectively.
Germany, which had shrunk at the end of last year, is predicted to have a 0.3% growth this year. Only Russia is expected to have a deeper contraction of 2.5%.
The projections do not take into account any of the Budget policies introduced by Jeremy Hunt, which the Office for Budget Responsibility (OBR), the UK Government’s tax and spending watchdog, claims will help the country avoid a recession.
Hunt stated earlier this week that the UK was “proving the doubters wrong” with a stronger-than-expected economic performance.
The OECD noted that consumer confidence had begun to “improve” in advanced economies, including the UK, resulting in “significant increases.” It stated that this would lead to a “mild rebound” in 2024, with the OECD upgrading its UK growth estimates from 0.2% to 0.9%.
It is expected that the Bank of England will raise interest rates once more to 4.25% before lowering them back to their current level of 4% in 2024 as inflation starts to decline.
