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UK growth forecast cut by OECD

Published 03/06/2015

Angel Gurria says the pace of recovery remains weak and investment has yet to take off
Angel Gurria says the pace of recovery remains weak and investment has yet to take off

Britain's growth forecast has been cut as an international think-tank warned the global economy is "muddling through" with a B-minus grade.

The Organisation for Economic Co-operation and Development (OECD) dropped its prediction for UK gross domestic product (GDP) to 2.4% this year, down from its previous forecast of 2.6% in March.

This still leaves the UK growing faster than any other major advanced economy.

The growth forecast for next year was also scaled back by 0.2% to 2.3%, as the US remains on course to lead the recovery race.

Last month the Bank of England slashed its GDP growth forecasts for the UK this year from 2.9% to 2.5% and for 2016 from 2.9% to 2.6%, citing concerns over weak global demand, the squeeze on Government spending and private firms cutting back their debts.

The OECD said that despite weakness in UK GDP in early 2015, growth has continued at a "healthy pace", boosted by strong rises in consumption, robust employment increases and a pick-up in real wages.

However, the Paris-based think-tank warned that global growth in the first quarter of the year was weaker than in any quarter since the crisis, as it blamed weak productivity and business investment.

It downgraded its global growth forecasts this year from 3.6% to 3.1%, and from 3.8% to 3.9% next year.

OECD secretary-general Angel Gurria said: "The global economy is projected to strengthen, but the pace of recovery remains weak and investment has yet to take off."

He added: "The failure to trigger strong, sustainable growth has had very real costs in terms of lost jobs, stagnant living standards in advanced economies, less vigorous development in some emerging economies, and rising inequality nearly everywhere."

Mr Gurria said for the global economy to move from a B-minus grade to an A grade would involve boosting investment to create jobs and stimulate consumption.

Shadow chancellor Chris Leslie said: "The OECD has provided a sobering reality check to the Treasury's complacency.

"The Chancellor should heed the OECD's warnings that 'continued weak productivity' could lead to 'a higher-than-expected budget deficit'.

"This report is right to voice concerns about the emergency budget and the need for a 'fair' approach to deficit reduction."

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