The OECD has marginally increased its outlook for UK GDP growth for 2016 to 1.8 per cent compared to 1.7 per cent it predicted in June before the country’s vote to leave the the European Union.
However, its forecast for the UK in 2017 has been reduced to 1 per cent, compared to the 2 per cent it predicted in June.
It forecasts global growth of 2.9 per cent this year, and “modest” improvement projected for 2017. It says weaker conditions in advanced economies, including Brexit, were are being offset by improvements in emerging economies.
Speaking to Brexit, the OECD report said: “While markets have since stabilised, sterling has depreciated by around 10 per cent in trade-weighted terms since the referendum.
“For 2016, GDP growth has been supported by a strong performance prior to the referendum, even though business investment contracted.”
The OECD says developments to date are “broadly consistent” with moderate scenarios set out prior to the referendum. It also says the UK economy was responding to “prompt action” by the Bank of England.
“In the longer term, the UK’s future trading arrangement with the EU and other partners will be critical to its economic prospects.”
The OECD says spillovers to the global economy had been modest, but that it expected negative impacts on the euro area to become more apparent in 2017.
“Overall, the world economy remains in a low-growth trap with persistent growth disappointments weighing on growth expectations and feeding back into weak trade, investment, productivity and wages.”