OECD Downgrades UK Growth Forecast for Next Year

The Organisation for Economic Co-operation and Development (OECD) has revised its forecast for the UK economy, predicting slower growth next year. The OECD expects the UK economy to grow by 1.1% this year, an upgrade from a previous estimate of 0.9%, driven by solid domestic demand in the second quarter. However, growth is expected to slow down slightly next year, reaching only 1%. This moderation in growth is attributed to recent increases in energy prices and higher policy rates.

The OECD also reported that UK inflation will be below previous forecasts this year, but will take longer than expected to fall back to target levels. Inflation is predicted to reach 3.6% next year, 0.5 percentage points above the OECD's previous forecast. The Organisation highlighted that interest rates are expected to remain unchanged in the near term.

Mathias Cormann, secretary general of the OECD, stressed that central banks 'must act if price pressures sharpen.' Stefano Scarpetta, the OECD's chief economist, noted that the AI boom is helping support global growth, but warned that any drop-off would be a cause for concern. He emphasized the need for investment and productivity to meet expectations to avoid significant global risks.