The UK is a bad student. According to the Organization for Economic Co-operation and Development (OECD), the country is expected to experience the worst economic performance of the rich G7 countries in the next two years.
In detail, the institution forecasts a contraction of 0.4% of the British gross domestic product (GDP) next year after growth of 4.4% this year, in its latest forecasts published this Tuesday. For 2024, it forecasts growth of 0.2% in the United Kingdom.
However, the organization is more optimistic than the British forecasting body (OBR), which forecasts -1.4% next year. The Bank of England is even more bearish, expecting a 1.5% contraction next year, followed by another 1% in 2024.
A labor shortage
Although the UK is less dependent than other countries on interruptions in the supply of Russian hydrocarbons, its energy mix is nonetheless based largely on gas, whose prices have risen in a year.
The country also suffers from an acute lack of workers, in particular due to a growing number of cases of long-term illnesses that are reducing the workforce, but also due to Brexit, which complicates the recruitment of European workers. More and more business leaders, such as those of the British clothing giant Next or the Manchester airport, criticize the impact of leaving the European Union on immigration and, therefore, on the labor market.
On Monday, the head of the Confederation of British Industry (CBI), the main employers’ organisation, called on the government to relax migration rules to accommodate more foreign workers, saying there was not enough arm in the country to meet the requirements. requirements. needs.
Inflation is currently above 11% in the UK and is expected to gradually decline to 2.7% by the end of 2024, the OECD projects.
Energy aid is not targeted enough
The organization also criticizes that the aid for energy bills granted by London to the British is not sufficiently directed to those most in need.
The massive spending generated will “feed inflation”, which “will require further tightening of monetary policy” and therefore risks weighing even more on activity, the OECD argues.
The organization thus estimates that the Bank of England, which has been raising its interest rate regularly for several months to offset price increases, should raise it to 4.5% in the second quarter of 2023.
Within the G7, Germany should post 1.8% growth this year and then a 0.3% contraction next year, almost as strong as on the other side of the Channel, before a 1.5% rebound in 2024, according to the OECD.
By comparison, the United States should experience growth of 1.8% this year, then 0.5% next year and 1.0% in 2024.
Source: BFM TV
