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The UK has risen in the rankings of a group of wealthy nations to have the joint-second highest economic growth for this year, a think tank has predicted.<\/p>\n
The economy is now expected to grow by 1.1%, the same rate as Canada and France, but behind the US.<\/p>\n
The Organisation for Economic Co-operation and Development’s (OECD) previous growth estimate in May had put UK growth at 0.4% for this year.<\/p>\n
Chancellor Rachel Reeves welcomed the faster growth figures, which will help reinforce the more upbeat tone she sought to strike in her speech to the Labour Conference.<\/p>\n<\/div>\n
She is facing the twin challenge of managing expectations ahead of the Budget next month by explaining how tough times lie ahead, while attempting to paint a positive picture to encourage investment.<\/p>\n
“Next month\u2019s Budget will be about fixing the foundations, so we can deliver on the promise of change and rebuild Britain,” Reeves said.<\/p>\n
The OECD, which is a globally recognised think tank, said that economic growth had been “relatively robust” in many countries, including the UK.<\/p>\n
But it added: “Significant risks remain. Persisting geopolitical and trade tensions could increasingly damage investment and raise import prices.”<\/p>\n
While the OECD’s prediction for the UK has improved for this year, it is only set to enjoy joint-fourth fastest growth in 2025, at 1.2%, ahead of only Germany and Italy.<\/p>\n
The UK is also still projected to see consumer prices rise at a faster rate than other G7 nations.<\/p>\n
It is set to rise by 2.7% this year and 2.4% next year, the OECD forecast.<\/p>\n
The OECD’s economic estimates, which are released twice yearly, aim to give a guide to what is most likely to happen in the future, but they can be incorrect and do change.<\/p>\n
They are used by businesses to help plan investments, and by governments to guide policy decisions.<\/p>\n<\/div>\n
The OECD has prescribed a “carefully judged” reduction in interest rates and “decisive” action to bring down debt to allow more room for governments to react to any future economic shocks.<\/p>\n
Stronger efforts to contain government spending and raise more revenue were key to stabilising debt burdens, it argued.<\/p>\n
Many wealthy countries are facing ageing populations, the challenges of climate change, and geopolitical pressure to raise defence spending.<\/p>\n
That is all in the wake of the financial crisis 16 years ago and more recently the Covid pandemic, which increased government borrowing and built up higher levels of debt.<\/p>\n
However, not all economists agree that bringing debt down should be the policy priority. Some would like to see borrowing rise for a time, which they argue would boost growth and reduce debt over the longer term.<\/p>\n<\/div>\n