In the News Teaching Activity – why has the OECD downgraded its UK growth forecasts? (May 2024)

The OECD has just published its latest economic outlook and its forecasts for UK economic growth for 2024 have been reduced from 0.7% to 0.4%.

The OECD predicts sluggish economic growth and high inflation for the UK compared to other G7 nations in 2024 and 2025. Growth forecasts have been revised downwards to 0.4% for 2024 and 1.0% for 2025, making the UK among the worst performers in the G7. Additionally, Britain is expected to have the highest consumer price growth among G7 countries. The OECD highlights challenges including fiscal drag, policy uncertainty, and weak external demand, urging credible budget plans that mean that public finances are likely to improve. The government believe the OECD has been pessimistic and point to their success in bringing inflation down. However, weak growth in an election year could prove to be politically damaging.

UK set for weak growth and highest inflation in G7, OECD says | Reuters

1 Explain what is meant by fiscal drag and how it can ‘weigh on consumers’ purchasing power’.

2 Discuss how policy uncertainty and weak external demand could affect the UK’s international trade performance.

3 Discuss the economic consequences of weak economic growth.