UK growth will remain anaemic for the next two years even if a Brexit deal is reached amid signs of an “entrenched” global downturn, a major international organisation has warned.
In its latest global outlook report, the Organisation for Economic Co-operation and Development (OECD) slashed its forecast for global growth once more, to 2.9% for 2019 and 2020 – the weakest pace since the financial crisis.
The Paris-based think tank said worldwide expansion will edge only slightly higher to 3% in 2021.
It had previously predicted global growth of 3.2% in 2019 and 3.4% in 2020.
The downgrades come amid global trade woes, with the US-China dispute impacting the world’s two largest economies.
The OECD said: “The global outlook is fragile, with increasing signs that the cyclical downturn is becoming entrenched.
“GDP (gross domestic product) growth remains weak, with a slowdown in almost all economies this year, and global trade is stagnating.”
The gloomier worldwide conditions are heaping further pressure on Britain’s economy as Brexit uncertainty also takes its toll, according to the OECD.
It is predicting Britain’s economy will grow by 1.2% this year and fall to 1% in 2020 before edging back up to 1.2% in 2021, with business investment slowing and the labour market showing signs of strain.
The forecasts for 2019 and 2020 remain unchanged on its forecast in May.
But the OECD reiterated warnings over the impact of a no-deal Brexit, saying a cliff-edge withdrawal would “significantly damage” the economy.
It forecasts that UK GDP could be 2% to 2.5% lower in the first two years under a no-deal Brexit scenario and said the Bank of England may need to slash rates by 0.5% to help offset the impact.
But even if a deal is agreed, it cautioned the recent uncertainty will cause lingering effects.
It said: “Investment growth will recover as uncertainty regarding the nature of Brexit is assumed to diminish gradually, but it will remain low.
“With the continued weakness in world trade, exports are set to grow only very modestly.”
The OECD called for central banks and governments across the world to consider taking action to boost activity given the global slowdown.
Lawrence Boone, chief economist of the OECD, said: “There is scope and an urgent need for much bolder policy action to revive growth.
“Reducing policy uncertainty, rethinking fiscal policy, and acting vigorously to address challenges raised by digitalisation and climate change, all have the potential to reverse the current slippery trend and lift future growth and living standards.”