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UK to suffer slowest growth of all rich nations next year, OECD says

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People walk in the rain over London Bridge in central London. Picture date: Tuesday March 12, 2024.

Lucy North – Pa Images | Pa Images | Getty Images

The U.K.’s “sluggish” growth prospects have put it on course to be the worst-performing economy of all advanced nations next year, according to new forecasts from the Organization for Economic Cooperation and Development.

U.K. gross domestic product is expected to grow 0.4% in 2024, the Paris-based think tank said Thursday in its latest global economic outlook. That figure is down from a previous prediction of 0.7% and less than all other G7 countries besides Germany, which is expected to be 0.2%.

The British economy is then forecast to expand by 1% in 2025, behind Canada, France, Germany, Japan and the U.S. as the lingering effects of high interest rates and inflation continue to weigh.

The downbeat prediction comes as the global economy shows signs of recovery, with growth forecast to remain steady at 3.1% in 2024 before rising modestly to 3.2% in 2025.

“We start seeing some recovery in many parts of the world,” Alvaro Pereira, director of the OECD’s policy studies branch, told CNBC’s Silvia Amaro Thursday.

OECD’s Pereira: Seeing some recovery in many parts of the world

Growth among advanced nations next year is set to be led by North America, which Pereira said follows “strong growth” forecasts of 2.6% in the U.S. in 2024. Growth in Europe, meanwhile, is expected to pick up next year after a sluggish 2024.

Among emerging economies, the OECD said there were also signs of strength. In China, where the economy has struggled in part due to a protracted downturn in the property market, growth projections were revised upward slightly from earlier forecasts, which Pereira said was due to “stronger performance than in the recent past.”

The OECD said the global outlook was an indication that central banks’ efforts to quell inflation were working.

“Monetary policy is doing what it should be doing,” Pereira said. “Real incomes are starting to recover. This will help consumption. We also think inflation is starting to come down.”

However, he added that questions remain over how robust the global recovery would be, particularly as central banks show signs of divergence on the future path of interest rates.

“The risk is obviously if inflation continues to be stickier than we expect, then obviously it’s possible that monetary policy will have to remain restrictive for a bit longer,” Pereira noted.

According to the OECD, headline inflation among its 38 member nations is expected to dip to 5% in 2024 from 6.9% in 2023, and then fall further to 3.4% in 2025. By the end of 2025, inflation is expected to return to targets of around 2% in most major economies, the OECD said.

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Germany’s economy chief Reiche sets out roadmap to end turmoil

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09 May 2025, Bavaria, Gmund Am Tegernsee: Katherina Reiche (CDU), Federal Minister for Economic Affairs and Energy, takes part in the Ludwig Erhard Summit. Representatives from business, politics, science and the media are taking part in the three-day summit. Photo: Sven Hoppe/dpa (Photo by Sven Hoppe/picture alliance via Getty Images)

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Germany needs to take more risks and boost its stagnant economy with a decade of investment in infrastructure, German Minister for Economic Affairs and Energy Katherina Reiche said Friday.

“The next decade will be the decade of infrastructure investments in bridges, in energy infrastructure, in storage, in maritime infrastructure… telecommunication. And for this, we need speed. We need speed and investments, and we need private capital,” Reiche told CNBC’s Annette Weisbach on the sidelines of the Tegernsee summit.

While 10% of investments could be taken care of with public money, the remaining 90% relied on the private sector, she said.

The newly minted economy minister also addressed regulation coming from Brussels, warning that it could hinder companies from investments and start-ups from growing if it is too restrictive. Germany has had to learn that investments comes with risks “and we have to kind of be open for taking more risks,” she said.

Watch CNBC's full interview with German Economy Minister Katherina Reiche

“This country needs an economic turnaround. After two years of recessions the previous government had to announce again [a] zero growth year for 2025 and we really have to work on this. So on the top of the agenda is an investor booster,” the minister added.

Lowering energy prices, stabilizing the security of energy supply and reducing bureaucracy were among the key points on the agenda, Reiche said.

Germany’s economy contracted slightly on an annual basis in both 2023 and 2024 and the quarterly gross domestic product has been flipping between growth and contraction for over two years now, just about managing to avoid a technical recession. Preliminary data for the first quarter of 2025 showed a 0.2% expansion.

Forecasts do not suggest much of a reprieve from the sluggishness, with the now former German government last month saying it still expects the economy to stagnate this year.

This is despite a major fiscal U-turn announced earlier this year, which included changes to the country’s long-standing debt rules to allow for additional defense spending and a 500-billion-euro ($562.4 billion) infrastructure package.

Several of Germany’s key industries are under pressure. The auto industry for example is dealing with stark competition from China and now faces tariffs, while issues in housebuilding and infrastructure have been linked to higher costs and bureaucratic hurdles.

Trade is also a key pillar for the German economy and therefore uncertainty from U.S. President Donald Trump’s changing tariff policies are weighing heavily on the outlook.

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Andrew Bailey on why UK-U.S. trade deal won’t end uncertainty

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Bank of England Governor Andrew Bailey attends the central bank’s Monetary Policy Report press conference at the Bank of England, in the City of London, on May 8, 2025.

Carlos Jasso | Afp | Getty Images

Bank of England Governor Andrew Bailey told CNBC on Thursday that the U.K. was heading for more economic uncertainty, despite the country being the first to strike a trade agreement with the U.S. under President Donald Trump’s controversial tariff regime.

“The tariff and trade situation has injected more uncertainty into the situation… There’s more uncertainty now than there was in the past,” Bailey told CNBC in an interview.

“A U.K.-U.S. trade agreement is very welcome in that sense, very welcome. But the U.K. is a very open economy,” he continued.

That means that the impact from tariffs on the U.K. economy comes not just from its own trade relationship with Washington, but also from those of the U.S. and the rest of the world, he said.

“I hope that what we’re seeing on the U.K.-U.S. trade side will be the first of many, and it will be repeated by a whole series of trade agreements, but we have to see that happen of course, and where it actually ends up.”

“Because, of course, we are looking at tariff levels that are probably higher than they were beforehand.”

Trump unveils United Kingdom trade deal, first since ‘reciprocal’ tariff pause

In Bank of England’s Monetary Policy Report released Thursday, the word “uncertainty” was used 41 times across its 97 pages, up from 36 times in February, according to a CNBC tally.

The U.K. central bank cut interest rates by a quarter percentage point on Thursday, taking its key rate to 4.25%. The decision was highly divided among the seven members of its Monetary Policy Committee, with five voting for the 25 basis point cut, two voting to hold rates and two voting to reduce by a larger 50 basis points.

Bailey said that while some analysts had perceived the rate decision as more hawkish than expected — in other words, leaning toward holding rates elevated than slashing them rapidly — he was not surprised by the close vote.

“What it reflects is that there are two sides, there are risks on both sides here,” he told CNBC.

“We could get a much more severe weakness of demand than we were expecting, that could then pass through to a weaker outlook for inflation than we were expecting.”

“There’s a risk on the other side that we could get some combination of more persistence in the inflation effects that are gradually working their way through the system,” such as in wages and energy, while “supply capacity in the economy is weaker,” he said.

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Trump knocks down a controversial pillar of civil-rights law

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IN THE DELUGE of 145 executive orders issued by President Donald Trump (on subjects as disparate as “Restoring American Seafood Competitiveness” and “Maintaining Acceptable Water Pressure in Showerheads”) it can be difficult to discern which are truly consequential. But one of them, signed on April 23rd under the bland headline “Restoring Equality of Opportunity and Meritocracy”, aims to remake civil-rights law. Those primed to distrust Mr Trump on such matters may be surprised to learn that the president’s target is not just important but also well-chosen.

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