Britain’s economy is expected to slow to a halt next year as it suffers more than any other major industrial country from the effects of Russia’s invasion of Ukraine.
The UK will grow by 3.6% in 2022 before posting zero growth in 2023, according to Paris-based think tank the Organization for Economic Co-operation and Development (OECD), with inflation rising is expected to average 8.8% this year and decline only slightly to 7.4% in 2023.
The forecast – contained in the OECD’s half-yearly economic outlook – represents a steep decline from growth estimated at 4.7% this year and 2.1% next year made six months ago.
Laurence Boone, chief economist at the think tank, said the UK was being hit by a combination of factors including higher interest rates, higher taxes, reduced trade and more expensive energy.
The OECD has said the UK is set to go from the second fastest growing economy in the G7 group of industrialized nations after Canada this year to the slowest growing in 2023. Japan, Germany, Italy, France and the United States constitute the other of the members of the group.
Boone said the global economy was paying a “high price” for Russia’s invasion. “A humanitarian crisis is unfolding before our eyes, claiming thousands of lives, forcing millions of refugees to flee their homes and threatening an economic recovery that was underway after two years of the pandemic,” she said.
“As Russia and Ukraine are major exporters of raw materials, the war has caused energy and food prices to skyrocket, making life much more difficult for many people around the world.”
Boone said the OECD had cut its global growth forecast for 2022 from 4.5% to 3%, while inflation in the organization’s 38 wealthy member countries would average nearly 9%, or double the forecast of last December’s Economic Outlook. Growth in 2023 is expected to be 2.8%, down from the 3.2% forecast six months ago.
“High inflation across the world is eroding real disposable income and living standards of households, and in turn depressing consumption,” Boone said, calling for the burden of the upward adjustment of the cost of living is shared equitably between employers and employees and between profits and wages.
“Uncertainty is discouraging business investment and threatens to dampen supply for years to come. At the same time, China’s zero Covid policy continues to weigh on the global outlook, reducing domestic growth and disrupting global supply chains,” she added.
The OECD is the second international body to cut its growth forecast in the past two days, with the World Bank warning in its global economic outlook of a return to 1970s-style stagflation – a combination of weak growth and drastic growth. high inflation.