Big upward revision for UK growth this year from the OECD
The UK economy will grow much faster this year than previously expected, according to an influential economics organisation, as it revised up forecasts it slashed after the Brexit vote.
The Organisation for Economic Cooperation and Development (OECD) raised its projections for 2017 GDP growth to 1.6 per cent, a change of 0.6 percentage points since its September prediction.
The revision is the largest across the major economies surveyed by the OECD.
The OECD and other influential economics bodies have steadily upgraded forecasts of UK growth as the economy has proved resilient since the country’s vote to leave the EU.
Read more: UK economy is gaining momentum despite Brexit fears, says the OECD
The organisation's own measure of economic momentum recently found the UK moving towards a stronger growth picture.
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The UK had the biggest upwards revision in 2017 growth prospects (Source: OECD)
In September’s forecast the group cut its growth expectations for 2017 in half, predicting one per cent growth as the economy reacts to policy uncertainty.
In November, faced with the acceleration of the UK economy on the back of continued strength in consumer spending, the OECD changed its prediction to 1.2 per cent.
The Bank of England was among other forecasters surprised by the strength of the British economy. It raised its prediction of growth this year to two per cent last month, and predicted consumers would dip into savings to sustain demand.
However, the OECD’s analysis still expects rising inflation to hit demand this year.
The report said: “UK growth is expected to ease further as rising inflation weighs on real incomes and consumption, and business investment weakens amidst uncertainty about the United Kingdom’s future trading relations with its partners.”
Read more: UK growth smashes developed nations average to sit atop G7
The OECD left its prediction that UK growth will slow to one per cent in 2018 unchanged.
The weak growth picture comes amid what the OECD describes as a “low-growth trap” for the world economy, which is expected to grow by 3.3 per cent in 2017 before accelerating in 2018.
OECD chief economist Catherine Mann said: “The pick-up in growth from countries taking fiscal initiatives is broadly welcome, but we cannot ignore the danger that the recovery gets knocked off track by policy errors or financial risks and vulnerabilities. Coherent and committed policy action is needed to simultaneously raise growth rates and improve inclusiveness.”