Economy receives welcome boost but inflation is stubbornly high, experts say

THE economy received a welcome upgrade yesterday but inflation is stubbornly high, experts said.

It means tax giveaways will be difficult, the Organisation for Economic Co-operation and Development predicts.

The OECD expects the UK’s economy to grow 0.3 per cent this year and one per cent next.

It previously forecast a 0.2 per cent fall in 2023 followed by a 0.9 per cent boost in 2024.

Inflation is likely to remain at 6.9 per cent, higher than in Germany or France, before falling to 2.8 per cent next year, lower than the UK’s European rivals, the Paris-based group expects.

It comes after the International Monetary Fund last month said it no longer believed the UK would fall into a recession this year.

Chancellor Jeremy Hunt said the OECD report “boosts our growth forecast and praises our action to help parents back to work with a major expansion of free childcare”.

He added: “But while inflation is still too high, we must stick relentlessly to our plan to halve it this year. That’s the only long-term way to grow the economy and ease the cost of living pressures.”

The OECD said with falling energy prices, the world economy had started to “turn a corner” following disruption after Russia’s Ukraine invasion.

But it said the UK economy will lag behind most advanced economies this year with household income growth still weak, giving “little fiscal space” for tax giveaways.

PM Rishi Sunak is reported to want to cut the basic income tax rate by 2p before the election expected next year.