A respected think-tank drastically slashed its forecast for the UK’s economy yesterday as it predicted a 0.7 per cent fall this year, having previously expected a rise of 0.5 per cent.
The Organisation for Economic Co-operation and Development (OECD) forecasts that the UK will fail to pull out of its double-dip recession in the current quarter, which will result in an annual decline rate of 0.7 per cent.
Its 2012 forecast is significantly worse than the 0.5 per cent expansion it predicted last year, when it slashed its forecast from growth of 1.8 per cent. The UK is predicted to be the worst performing G7 nation apart from Italy in the year.
However, it warned that its forecast does not take into account the effects of the Olympics, which many expect to provide a boost to the economy through an increase in tourism and spending on the high street following TeamGB’s success.
The OECD predicts the UK economy will not return to growth until the final quarter of the year, when it will expand marginally.
The Paris-based organisation, which works to improve social and economic wellbeing, warned that the worsening eurozone debt crisis is dragging on the entire global economy.
The Prime Minister’s official spokesman said: “Those figures demonstrate what we know which is that these are very difficult times in the world economy.
“The OECD highlights the euro area crisis as the single biggest global economic risk and in addition to that problem that UK is dealing with some deep-rooted issues at home. All the evidence shows that recovery from financial crisis takes a long time and there is no doubt we still have an impaired banking and financial system in this country.
“Clearly it is going to be difficult for us in this country while there are continuing problems in the eurozone.”