OECD Cuts UK Growth Outlooks as Debt, Inflation Risks Intensify
(MENAFN) Britain’s economic growth is poised to weaken over the next two years, the Organization for Economic Cooperation and Development (OECD) warned Tuesday, citing intensifying trade conflicts, tightening financial conditions, and growing uncertainty.
In its latest economic outlook, the OECD forecasts the UK’s gross domestic product (GDP) will expand by 1.3% in 2025, but slow to just 1% by 2026.
“Inflationary pressures will initially linger, due to higher import prices and robust wage growth in 2025,” the report stated. These inflationary forces are expected to subside in 2026 as excess capacity builds and the job market weakens, it added.
The OECD further cautioned that substantial interest payments on government debt are likely to weigh heavily on the UK’s public finances, contributing to an increasing debt load.
Public sector finances were highlighted as a major vulnerability, with the report warning that the UK’s limited fiscal room could fall short if the economy faces renewed shocks—particularly if existing fiscal rules are to be respected.
Rising inflation in the services sector was also identified as an added threat to economic stability.
On a global scale, the OECD projects GDP growth will slow from 3.3% in 2024 to 2.9% in both 2025 and 2026. These figures are based on current tariff levels as of mid-May, despite ongoing legal challenges.
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