LONDON (CNBC) — UK growth has lagged the world’s biggest economies since the COVID-19 pandemic and is substantially below the OECD average, according to a new report from the influential Paris-based group.
UK gross domestic product has contracted by 0.4% between the fourth quarter of 2019 and the third quarter of 2022, versus cumulative 3.7% growth in the 38-member Organization for Economic Co-operation and Development.
In the G-7 nations — which includes Canada, France, Germany, Italy, Japan, the U.S. and UK — GDP has grown by a cumulative 2.5%, with only the U.K. recording a decline.
“We think this is happening mostly because of investment and because of consumption,” Alvaro Pereira, the OECD’s chief economist, told CNBC’s Joumanna Bercetche on Tuesday.
“Knowing the UK faces a difficult fiscal situation, that’s why we welcome what the government has done in the latest statement,” he said.
Last week, Finance Minister Jeremy Hunt announced around £30 billion in spending cuts and £25 billion in tax hikes for workers and businesses in what he said was a bid to rebuild public finances, limit 41-year-high inflation and restore economic credibility after the market-rocking September budget.
Pereira added that the OECD’s forecast for the UK economy’s magnitude of growth between 2022 and 2024 was similar to the independent Office for Budget Responsibility, but it expected a shallower 0.4% recession next year followed but 0.2% growth the year after, while the UK’s OBR forecasts a deeper recession and a stronger rebound.
Former Bank of England policymaker Michael Saunders this week told CNBC Hunt’s plan had a “massive” hole where an economic growth strategy should be.
Tuesday also saw the release of the OECD’s global Economic Outlook report.