According to a report released by the Organization for Economic Cooperation and Development (OECD), Britain is expected to face one of the highest inflation rates among major developed economies this year. The report reveals that UK inflation, which recently dropped to single digits for the first time since last summer, is projected to average 7.2% in 2024.
The rate of price growth in the UK is said to be the fastest among the Group of Seven (G7) major industrialized nations and the third fastest among the Group of Twenty (G20). The main contributing factor to this inflationary pressure is the fluctuation in fuel prices. Economists believe that the volatility in fuel costs has driven up consumer prices in Britain.
The OECD has also downgraded its growth forecast for the UK in 2024, reducing it from 1% to only 0.8%. The organization points to the “significant risks” that the country is currently facing. This downgrade reflects the dimmer economic outlook for the UK since June, which can be attributed to the fourteen consecutive interest rate hikes implemented by the Bank of England. These hikes have had a squeezing effect on the country’s output.
Even with a moderate rebound expected next year, the OECD predicts that Britain will still lag behind the majority of G20 countries. The report states that the economic slowdown in the euro area and the UK is a result of the delayed impact of the large energy price shock in 2022, as well as the reliance on bank-based finance in many European economies.
The OECD maintains its estimated 0.3% growth in British GDP for this year, which, if realized, would be the second worst economic performance among the G7 countries, with Germany already in a recession.
The UK’s economic challenges and the high inflation rate have raised concerns among economists and policymakers. It is evident that the country needs to address these issues in order to foster sustainable economic growth and stability.
This news comes at a time when the global economy is already grappling with various challenges, including supply chain disruptions, rising energy costs, and inflationary pressures. It is crucial for governments and central banks to implement effective measures to navigate these uncertainties and support their respective economies.
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