The Organisation for Economic Cooperation and Development, a global organisation, predicts that the UK economy would be hit worse by the global oil crisis than the economies of other developed countries.
It predicted that the UK’s economy will contract more than that of any other G7 country in 2019.
Germany is the only other big economy that is anticipated to contract, despite dismal growth in the US and the eurozone.
In 2023, the OECD predicts a “significant growth slowdown” worldwide.
According to the OECD’s most recent report, the world economy will expand by 2.2% next year as a result of the resilience of emerging economies.
But the war in Ukraine was affecting economies unevenly, the OECD said, with European countries bearing the brunt of the impact on business, trade and the spike in energy prices.
The G7 includes the US, UK, Canada, France, Germany, Italy and Japan. While growth is expected to be weaker in most countries in the group, only Germany and the UK will contract, the OECD predicts.
The OECD expects the UK’s economyto shrink by 0.4% in 2023 to be followed by shallow growth of just 0.2% in 2024.
Germany’s gross domestic product (GDP) is expected to fall by 0.3%, the OECD report says.
Of the wider group of G20 countries, only Russia, which is subject to economic sanctions, is predicted to fare worse than the UK.
The OECD, an intergovernmental body that focuses on economic policy, lays some of the blame for the UK’s poor performance on the Energy Price Guarantee, the scheme to support household and business energy bills.
While subsidising energy bills reduces the immediate headline inflation rate, the OECD warns that it will add to overall demand in the economy, increasing inflationary pressures in the medium-term.
“Better targeting of measures to cushion the impact of high energy prices would lower the budgetary cost, better-preserve incentives to save energy, and reduce the pressure on demand at a time of high inflation,” it said
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