The UK economy is expected to experience slower growth next year, with the Organisation for Economic Co-operation and Development (OECD) forecasting a one per cent expansion. This projection is a marginal decrease from its previous estimate of 1.1 per cent, with the ongoing Iran war cited as a contributing factor.
Despite this, the OECD has revised its growth forecast for the current year upwards, from 0.9 per cent to 1.1 per cent. This adjustment follows stronger-than-expected GDP figures in recent months, driven by what the OECD described as "solid" demand levels in the second quarter, even with rising fuel prices.
Higher interest rates are anticipated to temper economic activity over the coming 12 months. While inflation may be lower than initially expected this year, the return to the Bank of England's two per cent target could take longer due to continuing conflicts. The OECD now expects inflation to average 3.1 per cent this year, falling to 2.6 per cent in 2027.
Treasury minister Emma Reynolds commented that the UK economy is demonstrating "strong resilience" despite conflicts in the Middle East and Ukraine. She noted that the UK had the fastest growth in the G7 during the first half of the year.