The Organization for Economic Co-operation and Development (OECD) has revised its global growth forecast for the year from 2.9% to 3.2%. This adjustment is attributed to stronger-than-expected economic activity in the first half of the year. However, the OECD cautions that growth may decline in the latter half as the effects of increased tariffs become more significant.
In the UK, the OECD has raised its growth forecast for this year to 1.4%, slightly above the earlier estimate of 1.3%. Despite this increase, the OECD projects a slowdown for UK growth to 1% in the following year, maintaining its earlier forecast. This expected decrease is attributed to a tighter fiscal stance, which could involve higher taxes or reduced government spending, alongside rising trade costs and economic uncertainty. Chancellor Rachel Reeves indicated that this may necessitate tax increases or spending cuts in the upcoming Budget in November.
The forecast for UK inflation has also been adjusted upward to 3.5% from a previous estimate of 3.1%. The OECD has highlighted that the UK is witnessing significant rises in food prices, with recent statistics showing continued inflation in key items like beef, butter, and chocolate.
In the US, growth is projected to rise from 1.6% to 1.8%, bolstered by substantial investment in sectors such as artificial intelligence. The impact of tariffs, recently imposed by the US government, continues to influence economic projections. The OECD noted that the effective tariff rate has reached 19.5%, the highest since 1933, potentially leading to increased costs for consumers. The organization warns that the effects of these tariffs may not yet be fully realized, but they are already beginning to impact consumer choices and market dynamics.
Overall, the OECD anticipates a noticeable softening in global economic growth in the latter part of the year as initial surges in trade activity diminish and tariffs take effect.
Source: https://www.bbc.com/news/articles/cx2n4877j7lo?at_medium=RSS&at_campaign=rss