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Forecast for UK growth reduced


George Osborne said the report showed his plan was working

George Osborne said the report showed his plan was working

George Osborne said the report showed his plan was working

The OECD has cut its forecast for UK growth as it sounded a warning about the dangers facing the world economy.

Gross domestic product (GDP) is now expected to increase by 3% this year, down from 3.1%, according to the international think-tank.

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

But the growth forecast for next year was also scaled back by 0.1%, to 2.7%, as the US remains on course to lead the recovery race in 2015.

In its latest economic outlook, the Organisation for Economic Co-operation and Development warned of a "global economy stuck in low gear", with trade and investment growth underperforming.

Secretary general Angel Gurria said: "We are far from being on the road to a healthy recovery. There is a growing risk of stagnation in the euro zone that could have impacts worldwide, while Japan has fallen into a technical recession."

The OECD said the GDP outlook together with high unemployment "should spur governments with a greater sense of urgency to fully employ monetary, fiscal and structural policy levers to support growth, notably in Europe".

Chief economist Catherine Mann said more action would be needed from the European Central Bank - which is under pressure to expand stimulus by buying government bonds.

"A Europe that is doing poorly is bad news for everyone," she said.

Meanwhile the report said UK growth was "set to continue at a strong, if slightly easing, pace" despite the squeeze on public spending.

It said expansion had been propelled by high job creation and it would be sustained by "robust private consumption and investment" next year and in 2016 - when GDP is expected to grow by 2.5%.

Business investment had continued to recover strongly as uncertainty fades.

But low wage growth, plus cooling house-buying activity and lower oil and gas revenues have hit tax receipts, pushing the current account deficit close to 5% of GDP, the report said.

Exports had been weak and could worsen, dragging on investment and productivity, should the struggling eurozone deteriorate further, it added.

Chancellor George Osborne said: "Today's economic outlook by the OECD provides further evidence that the Government's long term economic plan is working with the UK expected to grow faster than any other major advanced economy.

"But the report also highlights the growing external threat that the UK faces which is why we must continue to work through the plan that is delivering a better economic future."

Shadow chancellor Ed Balls said the forecast slowdown was "worrying".