Organization for Economic Co-operation and Development gives vote of confidence in the United Kingdom’s economy, revising growth forecast from 0.8% to 1.5% after a “string of positive indicators from the UK”…
Paris-based thinktank the Organisation for Economic Co-operation and Development has lifted its forecast for UK growth in 2013, in the latest vote of confidence for the fledgling recovery.
In May, when it last released projections for the world’s major economies, the OECD was expecting 0.8% growth in the UK for 2013. On Tuesday, it said recent survey evidence suggested GDP would expand by 1.5%, grouping the UK with the US and Japan as economies where, “activity is expanding at encouraging rates”.
The upgrade from the OECD comes after a string of positive indicators for the UK, including stronger-than-expected growth of 0.7% in the second quarter, falling unemployment, and survey evidence suggesting the strongest growth in manufacturing output for almost two decades.
Alongside revising up its forecast for the UK, the OECD used its interim economic assessment to warn that while a moderate recovery is underway in many major economies, global growth remains sluggish, and there are still risks to the upturn.
The OECD’s economists single out the impact of the Federal Reserve’s plans to phase out its massive programme of quantitative easing as creating particular problems for some economies.
“In many emerging economies, loss of domestic activity momentum together with the shift in expectations about the course of monetary policy in the United States and the ensuing rise in global bond yields have led to significant market instability, rising financing costs, capital outflows and currency depreciations,” it said.
Countries including India, Indonesia, Brazil and Turkey have been battling to control a potentially destabilising decline in their currencies since the Fed chairman, Ben Bernanke, announced his plans to “taper” QE in May.
The OECD’s experts warn that the slowdown in emerging economies – which have been major drivers of world growth in recent years – would offset the improvement in advanced economies, so that the global recovery would continue to be, “sluggish”.
In the US, the OECD expects growth to be 1.7% in 2013, slightly down on its May estimate of 1.9%. It also warns that the crisis in the eurozone is far from over, saying: “The euro area remains vulnerable to renewed financial, banking and sovereign debt tensions. Many euro area banks are insufficiently capitalised and weighed down by bad loans.”
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