The OECD has notably raised its growth forecast for the UK, attributing this positive outlook to Rachel Reeves's substantial £70 billion-per-year public spending initiative, which, however, raises concerns about increasing public debt and persistent inflation.
While the UK's anticipated growth of 0.9% in 2024 and 1.7% in 2025 contrasts favorably with stagnant economies in the eurozone, it mainly stems from an unprecedented rise in government expenditure that could result in debt surpassing 100% of GDP.
The OECD emphasizes that alongside the fiscal stimulus improving growth, persistent inflation is expected to remain above the Bank of England's target of 2% in the next two years, implying necessary adjustments in monetary policy.
Despite the optimism around the UK economy's growth being positioned as the fastest in the G7, the OECD stresses the importance of balancing ambitious fiscal stimulus with sustainable management of public debt to avert future economic pitfalls.
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