Blitz Bureau
NEW DELHI: The UK is facing the biggest hit to growth from the Iran war out of the G20 major economies, ac cording to Organisation of Eco nomic Co-operation and Development (OECD), reported BBC.
Economic growth in the UK this year is forecast to be 0.7per cent, it said, down from its previous forecast of 1.2 per cent. Inflation is also predicted to be higher than expected.
The OECD has downgraded forecasts for many of the world’s biggest econo mies due to the US-Israel war with Iran. A prolonged conflict could trigger “sig nificant energy shortages” globally, it warned, while if the sharp rise in fertiliser prices is sustained crop yields will be impacted and food prices will soar next year.
Wholesale oil and gas prices have soared since the war started, due to dis rupted supply from the effective closure of the Strait of Hormuz, and damage to oil and gas plants in the Middle East. Experts fear a prolonged period of high energy prices will dampen growth, fuel inflation, and make interest rate cuts less likely.
The effects are already being felt at the pump, with UK drivers seeing higher pet rol and diesel prices, and by heating oil users. Mortgage lenders have respond ed by raising rates and axing hundreds of deals.
The OECD’s global growth forecast for this year is unchanged at 2.9 per cent, but it predicts inflation across the G20 countries will be 4%, sharply up from its previous forecast of 2.8 per cent. UK inflation is now forecast to hit 4 per cent this year, up from the previous esti mate of 2.5 per cent.
The OECD further said inflation will drop to 2.6 per cent in 2027 – still up from its previous projection of 2.1 per cent. Among G7 countries, only the US is predicted to have higher inflation than the UK in the forecast, while only Italy is expected to see weaker growth. The G7 is made up of the US, UK, Canada, France, Germany, Italy and Japan.
In early March the UK Government’s official forecaster, the Office for Budget Responsibility (OBR), cut its expected growth rate for the UK this year to 1.1 per cent from the 1.4 per cent it predicted in last year’s Budget.
