Britain set to be the second weakest economy in the G20 in 2023
updated on 07 December 2022
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The Organisation for Economic Co-operation and Development (OECD) has predicted that the UK will sit among the worst performing economies of the rich world in 2023, second only to Russia. The OECD has determined that the British economy is set to contract by 0.4% next year, with its GPD only set to rise by 0.2% in 2024.
Although the majority of countries have been predicted by the OECD to have their economies cut in 2023, only Russia’s contraction of 5.6% is forecast to be more severe than Britain’s out of G20 nations, as reported in The Times.
The UK’s predicted poor performance has been attributed by an OECD economist to a combination of rising interest rates, the market turbulence during Liz Truss’ short period as prime minister, and government action to bring down borrowing and debt.
UK-based forecasters are divided over the length and impact of the oncoming recession, the Office for Budget Responsibility has warned downturn will last 12 months, while the Bank of England has predicted a two-year downturn should interest rates rise above 5%. The OECD predicts the Bank rate will peak at 4.5% next year, and will then maintain at this rate until 2024.
“The global economy is reeling from the largest energy crisis since the 1970s. The energy shock has pushed up inflation to levels not experienced for many decades and is lowering economic growth all around the world,” said OECD Chief Economist Álvaro Pereira.
Pereira added: “Higher inflation and lower growth are the hefty price that the global economy is paying for Russia’s war of aggression against Ukraine. Although prices were already creeping up due to the rapid rebound from the pandemic and related supply chain constraints, inflation soared and became much more pervasive around the world following Russia’s invasion.”
Jeremy Hunt, the chancellor, stated the government will “face down” economic headwinds as he unveiled a £55 billion plan for tax rises and spending cuts set to span across the next five-years.
