UK Economy to Grow Faster Than Japan, Italy, and Germany This Year: OECD Report

UK Expected to Grow Faster Than Other Major Economies

According to the latest report from the Organisation for Economic Cooperation and Development (OECD), the UK economy is set to grow faster than Japan, Italy, and Germany this year. This update places the UK joint second among G7 countries, just behind the US.

Higher Inflation Still Expected in the UK

While the UK is expected to have strong growth, the OECD predicts that inflation will remain the highest among the G7 countries. This means that prices for everyday goods and services will keep rising.

Economic Growth in the UK

The OECD has raised its growth forecast for the UK to 1.1% for 2024, up from an earlier estimate of 0.4%. The UK is bouncing back after a mild recession at the end of last year. For 2025, the growth forecast remains at 1.2%.

The UK Moves Ahead of Other Countries

Earlier this year, the UK was expected to lag behind other major economies, but the updated forecast now shows the UK will outpace Japan, Italy, and Germany. In terms of growth, the UK is on the same level as Canada and France but remains behind the US.

Rising Prices Continue to Be a Challenge

Despite the good news of growth, people in the UK will still face higher prices. Inflation, 2.2% in August, is expected to rise to 2.7% in 2024 and remain at 2.4% in 2025. This means that although the economy is growing, the cost of living will continue to increase at the fastest rate among the G7 countries.

Global Economy Starting to Recover

The OECD report states that the global economy is beginning to recover from the impacts of the COVID-19 pandemic and Russia’s invasion of Ukraine. Central banks are cutting borrowing costs, and inflation is decreasing, helping many major economies.

Surprise Recovery in the UK

According to the OECD’s chief economist, Álvaro Pereira, the UK economy’s recovery earlier this year was stronger than expected. Initially, the OECD had predicted a slower recovery, citing low consumer spending and weak business investment.

Consumer Spending on the Rise

Although business investment in the UK remains low, rising wages and falling inflation have boosted consumer spending more than expected.

Debt Levels Need to Be Managed

Pereira noted that, like other European countries, the UK must manage its debt levels carefully. However, he emphasized that this should not involve harsh austerity measures but rather smart financial planning.

Global Trade Improving

Global trade is also recovering, with shipping companies finding new ways to avoid delays, which has helped trade return to pre-pandemic levels faster than expected. However, the OECD warned that higher shipping costs and inflation still affect many countries.

Higher Food Prices Impacting Workers

Food prices remain high, reducing people’s spending power, especially those with low incomes. Germany has been hit particularly hard, with food prices increasing by 16% compared to wage growth. In contrast, workers in the UK have seen their wages grow by nearly 102% of their 2019 levels.

Concerns Over High Debt

The OECD is concerned that governments might increase borrowing to cover spending gaps, which would be costly with current high interest rates. Higher debt means governments must spend more on paying interest, leaving less for critical areas like health and education.

UK Government’s Focus on Growth

UK Chancellor Rachel Reeves welcomed the stronger growth figures but acknowledged that more work still needs to be done. She emphasized that economic growth remains the government’s top priority.

Interest Rates to Gradually Decrease

Andrew Bailey, the governor of the Bank of England, said this week that he expects interest rates to be reduced slowly as inflation starts to ease.

UK Economy to Grow Faster Than Japan, Italy, and Germany This Year: OECD Report

UK Expected to Grow Faster Than Other Major Economies