The UK economy will grow less than expected this year and will flatline in 2023 as the wider global picture darkens, according to a major intergovernmental organisation.
The OECD (Organisation for Economic Co-operation and Development) has downgraded its annual projection, saying that UK GDP will grow by 3.4% in 2022, down from the 3.6% it predicted in June.
The Paris-based body also forecast a global economic slowdown, with world output projected to be $2.8 trillion lower than its prediction from before Russia attacked Ukraine – a loss of income equivalent in size to the French economy, reports Reuters.
The OECD projected eurozone economic growth would slow from 3.1% this year to only 0.3% in 2023, with the 19-nation currency bloc in a recession for part of the year.
Bloomberg reports that more severe fuel shortages – especially for gas – could reduce growth in Europe by a further 1.25% in 2023 and raise inflation by over 1.5%, the OECD said, pushing “many countries into a full-year recession in 2023”.
European growth “would also be weakened in 2024”, it added.
OECD secretary general Mathias Cormann said that governments should only provide shorter-term support during the crisis, or risk making it worse by propping up inflation, reports the Evening Standard.
Cormann said that vulnerability to high gas prices was caused by “the delay in implementing the green transition” and urged action on this front.
“Near-term energy security and affordability, supply diversification, energy efficiency and demand-side measures are urgent priorities in the short-term which should be accompanied by stronger policy measures to enhance investment in clean technologies,” he added.
Record IMF bailouts
Meanwhile, IMF’s lending to economically troubled countries has hit a record high of $140 billion in 44 separate programmes, according to FT analysis.
Further defaults are expected as the costs of borrowing money increases in response to expected changes in central bank policy.
Zambia and Sri Lanka - which defaulted in the pandemic along with Lebanon, Russia and Suriname - are negotiating bailouts to restructure their debts. Ghana, Egypt and Tunisia are in talks for similar support.
The IMF approved a $1.1 billion bailout for Pakistan in August, and Argentina is to receive $3.9 billion as part of its $41 billion programme.