Who cares about economic forecasts, which have proven to be about as useful as sticking a pin in a chart, blindfolded? But given their prominence when they foresee the UK economy performing less well than the EU, it provides a little balance to note when it is the other way around. A little over a year ago the OECD, like the IMF, was pessimistic about the UK economy, predicting that it would shrink by 0.4 per cent in 2023, and just about creep back into growth in 2024. ‘UK faces worst downturn of any advanced economy, OECD says’ was how the BBC reported it. The only bright spot was that, unlike the IMF, the OECD thought that Britain wouldn’t do quite as badly as Russia.
And now? There has been somewhat quieter reporting of today’s OECD Economic Outlook, which is predicting that the UK economy will now outgrow the Eurozone in 2024. The UK, it now believes, will grow by 0.7 per cent in 2024, compared with 0.6 per cent for the Eurozone. It has in fact downgraded the Eurozone’s prospects by 0.3 per cent over the past three months. It expects Germany to be Europe’s also-ran, growing by just 0.3 per cent over the coming year.
The OECD turned out to be wrong last year. The UK economy grew by 0.3 per cent while Germany’s shrank, by 0.1 per cent. The Eurozone, which had been expected to grow by 0.8 per cent, succeeded in growing by 0.5 per cent. The OECD also under-estimated global growth in 2023.
But let’s not quibble about small fractions of a per cent in the growth rates of the UK versus the Eurozone. The greater picture is that Europe – Britain included – continues to drag along the ground while US growth has recovered to pre-pandemic levels. The US economy grew by 2.5 per cent in 2023, according to the OECD – a whole percentage point higher than the organisation predicted a year ago. The pandemic seems to have increased the growing gulf between the US and Europe. Last week’s US jobs figures said it all. The US added a remarkable 353,000 jobs in January, more than twice an already-bullish forecast. The US stock market rose to a high because, well, more jobs are an indication of more economic activity which might be expected to lead to higher profits. European stocks, by contrast, fell back because investors decided that it meant global interest rates will remain higher for longer. Europe’s economy is still suffering a hangover from the years of cheap debt, and is looking for a hair of the dog solution.
Britain is very much included in this. If we want to pull out of the stupor affecting the whole of Europe we need to find some way to become a bit less like the EU and a bit more like the US. But it is hard to see how that is going to happen on current government policy or opposition proposals.
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