OECD Forecast: UK Economy Worst In Developed World

9th June 2022 / United Kingdom
OECD Forecast: UK Economy Worst In Developed World

The Johnson government has been deeply wounded by the recent no-confidence vote – quite possibly mortally. Well over 70 per cent of backbenchers, those not with government appointments, voted against Johnson. From now on, the gloves are off and Johnson’s team are now almost completely focused on survival. This is very bad news for Britain. The country is facing an era dominated by a complex of multi-layered crises.

There is a public health crisis with the NHS. It already has over 6 million on its waiting list. Within two years, this figure is expected to double. Excess deaths will be the result. There is a rapidly building cost-of-living crisis, set to get much worse as the winter rolls in. Food or fuel will determine who suffers from malnutrition or hyperthermia – as the young are affected by the former and the old, the latter. Again, excess winter death will be the result.

Then there is the never-ending tragedy of Brexit unfolding before us. This is a tragedy because as the Economic Times has said all along, GDP will fall by several percentage points for at least another decade. This website forecasted a recession long before economists and analysts started saying the same. We went one stage further and stated that by the winter, Britain would need to prepare for what amounted to a war economy. That may seem laughable – that is until the latest news about Britain’s economy – told by the latest data from the OECD.

The FT reports that – Economic growth in the UK will grind to a halt next year with only Russia, hobbled by western sanctions, performing worse among the G20 leading economies, the OECD forecast on Wednesday.

To put that in other words, of all western economies, of all the G7 and G20 – Britain will only do better than Russia which is facing forcibly imposed economic sanctions on a vast scale. Average world GDP is expected to rise by 2.8 per cent. Italy is expected to do very badly at 1.2 per cent but Britain is forecast to be stuck at zero. The surprise, if anything, it that the real number is not minus.

The FT explains it like this. The Paris-based organisation’s forecast highlighted the effects of high UK inflation still squeezing household and corporate incomes in 2023 alongside a further round of tax increases as the main drivers of the country’s expected weak economic activity. The forecasts underscore the difficulties a weakened Prime Minister Boris Johnson is likely to face in the months ahead as he tries to shore up support within his Conservative party after surviving a no-confidence vote on Monday and demonstrate the government can manage the economy effectively.

This is the problem. Brexit is just about to reach its sixth anniversary and it is causing many problems adding to the UK’s economic woes. One of its outcomes was the crash of Sterling against all other major currencies, especially the USD. Add to that the fact that global investors are now thinking twice about the UK because a very weak government means political instability. Along with other very serious matters that need focus and expertise, the cocktail of failure is nicely mixed.

Speaking about the specific weaknesses of the UK economy compared with other rich countries, Laurence Boone, chief economist of the OECD, said the UK was unique in simultaneously grappling with high inflation, rising interest rates and increasing taxes. “Inflation is high compared with other OECD countries in the G20 - that’s one thing. The other thing is there is fast monetary tightening, which is obviously responding to the inflation, and there is fiscal consolidation, which is the highest in the G7.” It’s a perfect storm.



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