The OECD’s global growth forecast for this year is unchanged at 2.9%, but it predicts inflation across the G20 countries will be 4%, sharply up from its previous forecast of 2.8%. The G20 includes the EU plus 19 other countries, collectively accounting for 85% of the world’s economic output.
UK inflation is now forecast to hit 4% this year, up from the previous estimate of 2.5%.
The OECD then forecasts inflation will drop to 2.6% in 2027 – still up from its previous projection of 2.1%.
Among G7 countries, only the US is predicted to have higher inflation than the UK in the forecast, while only Italy is expected to see weaker growth. The G7 is made up of the US, UK, Canada, France, Germany, Italy and Japan.
In early March the UK government’s official forecaster, the Office for Budget Responsibility (OBR), cut its expected growth rate for the UK this year to 1.1% from the 1.4% it predicted in last year’s Budget.
But this forecast was made before the Iran war, which the OBR said could have a “very significant” impact on economies.
Chancellor Rachel Reeves said the Iran war would affect the UK, but “in an uncertain world we have the right economic plan”.
“The decisions we have taken have put us in a better position to protect the country’s finances and family finances from global instability,” she said.
But shadow chancellor Sir Mel Stride called the downgrade a “damning verdict on how vulnerable our economy is thanks to Labour”.
“Rachel Reeves can blame the world all she wants, but it’s her choices that have weakened our economy at the worst possible moment,” he added.
The Liberal Democrats called the forecast a “wake-up call that the government’s anti-growth agenda” was costing families.