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United Kingdom GDP growth is expected to be modest at 0.3% in 2023 and to improve moderately to 1.0% in 2024. Government consumption and investment will continue to prop up the economy, before a gradual strengthening of private expenditure due to falling wholesale gas prices and improved global conditions. Headline inflation is projected to slow on the back of declining energy prices and to come down close to target by the end of 2024. Core inflation is set to be more persistent due to strong services inflation, only receding to 3.2% in 2024. Unemployment will rise, reaching 4.5% in 2024. Monetary policy will remain tight, increasingly weighing on output and lowering inflation, and the fiscal stance will be restrictive over 2023-24. However, little fiscal space is left, leaving the government significantly exposed to movements in interest rates. Swiftly implementing the spring budget’s supply-side measures to increase labour supply, and providing certainty for investment and trade are key to strengthening potential growth. Price pressures persist despite slowing activity and tighter financial conditions Private consumption and housing investment weakened in the latter half of 2022. The first quarterly estimate for 2023 points to lacklustre real GDP growth of 0.1% in the three months to March. Retail sales volumes were 3.0% lower in April than in the same month last year, and consumer confidence remains depressed, although improving. Business sentiment is mixed, with a robust pick up in services but continuing weakness in manufacturing. Net mortgage borrowing continued to fall in March, while the average cost of bank loans to firms remains elevated at almost 5.8%, significantly above the rate of about 2.0% when the monetary tightening cycle started in December 2021.
United Kingdom 1
Source: Office of National Statistics; and OECD Economic Outlook 113 database. StatLink 2 https://stat.link/s83bzk
OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 1: PRELIMINARY VERSION © OECD 2023