The Organisation for Economic Cooperation and Development (OECD) has stated that the global economy is “turning a corner” than in its latest outlook, while raising its growth forecast for the UK, placing it ahead of Japan, Italy, and Germany. According to the OECD, the UK now ranks second among the G7 countries, behind the US, though it is projected to have the highest inflation rate in the group.
The OECD referred to the UK’s economic growth as “robust” and increased its 2024 growth estimate from 0.4% to 1.1%, as the country emerges from a mild recession experienced at the end of last year. The forecast for 2025 remains unchanged at 1.2%. In May, the UK was expected to lag behind its G7 peers, but it is now projected to surpass Japan, Italy, and struggling Germany, with growth on par with Canada and France, though still behind the US.
Despite these improvements, rising prices will continue to challenge the UK, with inflation expected to average 2.7% in 2024, up from 2.2% in August, and remain at 2.4% in 2025—the fastest rate in the G7. Globally, the OECD said the economy was “turning a corner,” with lower inflation and reduced borrowing costs likely to fuel growth, helping the global economy recover from the disruptions caused by the pandemic and Russia’s invasion of Ukraine.
OECD chief economist Álvaro Pereira noted the surprising strength of the UK’s recovery earlier this year after a contraction in 2023. The OECD had previously forecast low consumer spending and weak business investment to hamper growth. While business investment remains subdued, higher wages and lower-than-expected inflation have supported consumer spending.
Pereira highlighted the need for countries like the UK to manage debt levels responsibly, though without imposing harsh austerity measures. He emphasized the importance of fiscal prudence. The OECD reported that global trade was rebounding more quickly than anticipated, as shipping firms adjusted to avoid disrupted routes.
Meanwhile, weaker inflation has led to higher real incomes, boosting consumer spending across many countries. However, Asian ports are struggling with increased demand, driving container costs up by 160% since last year. Additionally, food prices remain high, disproportionately affecting low-income households, particularly in Germany, where food prices have risen 16% beyond average wage growth since 2019.
Germany has been hit hard by rising food prices, with workers earning 98% of their 2019 wages, while in Australia and the UK, workers earn over 100% and 102%, respectively, despite food prices outpacing wages. The OECD warned that high debt levels combined with elevated interest rates could limit government spending on essential services like health and education.
UK Chancellor Rachel Reeves welcomed the improved growth forecasts but acknowledged that more work is needed. She indicated that next month’s budget will focus on addressing fundamental issues to drive further growth. Bank of England Governor Andrew Bailey, meanwhile, predicted that interest rates would be reduced “gradually” as inflation cools.
 has stated that the global economy is "turning a corner" than in its outlook){kind=link}