UK economy 'is grinding to a halt' as world runs out of options
THE world's largest economies are close to grinding to a halt, with the UK facing near stagnation, according to an influential global economic think tank.
The Organisation for Economic Co-operation and Development (OECD) forecast that economic growth in the UK would fall to 0.3 per cent by the end of the year, a severe drop from the 2.5 per cent recorded in the third quarter of 2010.
The OECD blamed the slowdown on the uncertainty caused by the eurozone debt crisis and the debate in the US over fiscal policy.
It also cited the dwindling number of options open to governments to boost GDP growth as an example of factors that were driving down business and consumer confidence.
The OECD suggested its projections could be on the optimistic side, and warned that the UK economy could even contract by as much as 1 per cent.
The organisation's "interim assessment", published yesterday, forecast that the G7, the seven largest global economies, would expand by only 0.2 per cent in the final three months of this year.
According to its report, Germany could be the worst affected economy, contracting by 1.4 per cent in the last quarter.
If the OECD's analysis proves to be correct, then the UK is on course to experience a steep decline in growth by the end of the year. It would have fallen from 2.5 per cent in the third quarter of 2010 to 0.7 per cent in the second quarter of 2011, 0.4 per cent in the third quarter and 0.3 per cent in the last three months of this year.
The figures were released on the same day that the Bank of England's monetary policy committee (MPC) again held interest rates at their record low of 0.5 per cent. The MPC also held off from printing more money to stimulate the economy through "quantitative easing".
Shadow chancellor Ed Balls renewed his call for the government to ease up on austerity measures in the hope of bolstering demand, and said Chancellor George Osborne should use this weekend's meeting of G7 finance ministers in France to seek agreement on a global plan for growth.
Mr Osborne disputed the idea that the slowdown had been caused by his government's deficit reduction programme. He said that countries throughout the world were being affected by factors beyond Britain's control, such as high oil prices, the sovereign debt crisis in the eurozone and concerns about growth in the US.
"The forecasts we got from the OECD today show that this is a problem for many advanced economies," Mr Osborne said. "There was a revision down in their forecast for growth for virtually every developed economy.
"Actually, the real issue here is the long-term one, which is the big overhang of public and private debt from a decade-long boom that went unchecked.
"Unfortunately, the recovery from this is slower and takes longer than recoveries from previous recessions."
He added: "I think Britain has put in place the right policy mix."
The OECD interim economic assessment is designed to check if projections made in its last economic forecast are on track. In May, the body downgraded its estimate for UK GDP growth to 1.4 per cent for 2011 and 1.5 per cent for 2012.
THE world's largest economies are close to grinding to a halt, with the UK facing near stagnation, according to an influential global economic think tank.
The Organisation for Economic Co-operation and Development (OECD) forecast that economic growth in the UK would fall to 0.3 per cent by the end of the year, a severe drop from the 2.5 per cent recorded in the third quarter of 2010.
The OECD blamed the slowdown on the uncertainty caused by the eurozone debt crisis and the debate in the US over fiscal policy.
It also cited the dwindling number of options open to governments to boost GDP growth as an example of factors that were driving down business and consumer confidence.
The OECD suggested its projections could be on the optimistic side, and warned that the UK economy could even contract by as much as 1 per cent.
The organisation's "interim assessment", published yesterday, forecast that the G7, the seven largest global economies, would expand by only 0.2 per cent in the final three months of this year.
According to its report, Germany could be the worst affected economy, contracting by 1.4 per cent in the last quarter.
If the OECD's analysis proves to be correct, then the UK is on course to experience a steep decline in growth by the end of the year. It would have fallen from 2.5 per cent in the third quarter of 2010 to 0.7 per cent in the second quarter of 2011, 0.4 per cent in the third quarter and 0.3 per cent in the last three months of this year.
The figures were released on the same day that the Bank of England's monetary policy committee (MPC) again held interest rates at their record low of 0.5 per cent. The MPC also held off from printing more money to stimulate the economy through "quantitative easing".
Shadow chancellor Ed Balls renewed his call for the government to ease up on austerity measures in the hope of bolstering demand, and said Chancellor George Osborne should use this weekend's meeting of G7 finance ministers in France to seek agreement on a global plan for growth.
Mr Osborne disputed the idea that the slowdown had been caused by his government's deficit reduction programme. He said that countries throughout the world were being affected by factors beyond Britain's control, such as high oil prices, the sovereign debt crisis in the eurozone and concerns about growth in the US.
"The forecasts we got from the OECD today show that this is a problem for many advanced economies," Mr Osborne said. "There was a revision down in their forecast for growth for virtually every developed economy.
"Actually, the real issue here is the long-term one, which is the big overhang of public and private debt from a decade-long boom that went unchecked.
"Unfortunately, the recovery from this is slower and takes longer than recoveries from previous recessions."
He added: "I think Britain has put in place the right policy mix."
The OECD interim economic assessment is designed to check if projections made in its last economic forecast are on track. In May, the body downgraded its estimate for UK GDP growth to 1.4 per cent for 2011 and 1.5 per cent for 2012.
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