Laurence Boone, the OECD’s chief economist, said there was “higher inflation in the UK than in other European countries. As a result, there is a faster tightening of monetary policy and a faster fiscal consolidation “. In addition, “trade frictions and what is happening with global supply chains” are also worsening in the UK, he said.
The OECD said that despite having limited trade and financial ties with Russia and Ukraine, the UK will suffer because higher global energy prices “add to the pressure on household incomes, which they are now declining in real terms. “
A Treasury spokesman said: “Thanks to the support we provided during the pandemic, the UK had the fastest growth of the G7 last year and our unemployment rate is the lowest it has been at almost 50 years, but we recognize that many people will be concerned about these forecasts. “
“While we cannot completely isolate the UK from global pressures, our economy is in a strong position to meet these challenges.
“We have a growth plan and we are supporting people with the cost of living.”
The UK’s problems are part of a major global slowdown. World GDP will rise by 3% this year, a third slower than predicted by the OECD in December, before the invasion of Ukraine.
Even before the war, inflation took its toll as living costs rose due to the rise of the pandemic and China’s zero-Covid blockades.
The OECD said: “In most OECD economies, real disposable household income was already declining year-on-year in the last quarter of 2021, despite strong employment growth. and many believe that this decline has continued during the first quarter.
Growth in the eurozone is expected to slow to 2.6% this year and 1.6% next year, with the risk of a recession if Russia’s gas supply is cut completely. by Moscow or by an EU embargo, as “European economies are struggling to get rid of Russian fuel. But as alternative energy sources may not be easy to increase rapidly, there is a risk of ‘raising prices or even shortages’.
The total end of Russian gas imports would affect 1.25 percentage points more than eurozone growth, which “could leave many countries near or in recession in 2023,” the OECD said.
“In 2024, growth will also be weakened if the shocks persist, and demand will gradually align with the reduction in supply. Real household incomes would be severely affected, falling by more than 2% in eurozone economies. “
But the OECD said this may be necessary to help Ukraine win the war: “Limiting Russia’s ability to finance the war, as the embargo on Russian oil exports is intended, is essential to speeding up the war. end of this devastating conflict, “he said. said tank.
Meanwhile, the US economy is slowing from 2.5% growth this year to 1.2% next year, with Australia falling from 4.2% to 2.5% during the same period.
The war has added to the blockades in China, which exacerbate the chaos that had already engulfed global supply chains during the pandemic.