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The OECD lowers global growth forecasts and the UK will flatten next year thanks to ‘falling incomes’ and rising energy bills
The UK is facing stagnant growth this year and will flatten completely by 2023, according to the OECD.
In a grim update, the international body lowered global forecasts and warned that the global economy will take a $2.8 trillion blow after the war in Ukraine.
It said UK plc will grow by 3.4 percent this year – lower than the previously forecast 3.6 percent. And next year there will be zero gains as the country grapples with “falling real incomes and disruptions in energy markets.”
In a grim update, the international body lowered global forecasts and warned the global economy will take a $2.8 trillion blow after the Ukraine war
The interim outlook report comes days after the Bank of England admitted that the UK is likely already in a technical recession.
It forecast a 0.1 percent decline in GDP in the current financial quarter, after a decline in the previous three months.
According to the OECD, Germany and Russia are the only two countries in the G20 to have a weaker economic performance next year.
They would be on track for a 0.7 percent and 4.5 percent decline in GDP, respectively.
The G20 as a whole is expected to show 2.2 percent economic growth this year, 0.6 percentage points lower than previous forecasts.
Britain faces the threat of a full-blown sterling crisis today after the currency plunges to an all-time low against the dollar following Kwasi Kwarteng’s tax cut.
The pound was “absolutely hammered” in trading early this morning, falling as low as $1.0327 – below the grim baseline of $1.0545 in 1985.
While much of the ground was reclaimed and returned to just below $1.08, that appears to be due to the Bank of England being expected to implement an emergency rate hike of 0.75 percentage point this week.
Chancellor Kwasi Kwarteng pictured arriving in Downing Street with aides this morning
Since many major commodities are priced in dollars, a weak pound pushes inflation up further. Markets are now pricing in that the nominal rate will reach 6 percent next year, causing further misery for families.
The cost of government loans also rose to its highest rate in a decade – causing another concern for Kwasi Kwarteng as he uses extra debt to fund tax cuts and the utility bill.
However, the Chancellor has refused to change course, with Downing Street saying there are no plans for him or Liz Truss to make statements that would reassure the markets. Just yesterday, Mr. Kwarteng promised that more tax cuts are in the pipeline.