The British economy is forecast to grow by 1.3 percent this year, and by 1.4 percent next year, according to a forecast released on Wednesday by the Organization for Economic Cooperation and Development (OECD), reports BSS/Xinhua.
The economic forecast for GDP growth was revised upwards for next year by 0.1 percentage point, despite the uncertainties of Brexit. However, GDP growth in 2020 was forecast at just 1.1 percent.
The British economy has enjoyed just modest performance since the Brexit referendum in June 2016 set the country on a path to leave the 28-nation bloc, with economic growth rate languishing near the bottom of the table of G7 advanced nations.
But the OECD’s latest forecast puts the British GDP growth rate this year and next above its G7 peers Italy and Japan.
Both private consumption and investment growth have slowed markedly since 2016, reflecting uncertainties and a decline in households’ purchasing power, the OECD noted in an annual report on the British economy.
Inflation is currently above the central bank the Bank of England’s mandated target of 2 percent and the OECD forecasts that it will stay above that rate until 2020, while a low unemployment rate of 4.1 percent will continue.
OECD chief economist Laurence Boone told Xinhua on Wednesday afternoon:
“Inflationary pressure from wages remains low in the UK, but past currency depreciation, and more recently, higher commodity prices, have elevated inflation temporarily.”
The OECD noted Brexit as a possible headwind, and called on the authorities to stand ready to react should there be no Brexit agreement.
Monetary policy conditions should remain accommodative if demand is depressed, and In addition to letting the automatic fiscal stabilizers fully operate, the government should focus on measures that foster productivity and inclusive growth in the long term, such as greater spending on training and low-skilled workers, the OECD advised.
Poor growth in productivity in Britain has held back wage growth, but the circumstances behind Britain’s poor performance are also seen in other developed economies.
Boone said: “Productivity is a longstanding issue in the UK, as it is across the OECD, but we do not see any instant solutions. Investing in education and skills is the key to elevating productivity growth over the longer term.”