LONDON — The Organisation for Economic Cooperation and Development (OECD) has become the latest major international organisation to increase its growth forecasts for the United Kingdom, effectively acknowledging that previous forecasts were too pessimistic about the impact of last June’s vote to leave the European Union.
The OECD on Tuesday increased its UK growth forecast for 2017 to 1.6%, up from a previous estimate of 1.2%, presented in November last year. The forecast for 2018 remains unchanged at 1%.
Britain’s economy has been aided since the vote by the measures put in place by the Bank of England in response to the referendum in August. The BoE cut interest rates to a record low of 0.25% and launched a £60 billion programme of bond buying to help the UK cope with the shock of the vote, and the OECD believes it has achieved its aims.
“We have to remember the extent to which there was an explicit very forceful policy response by the Bank of England and a change in fiscal stance by the government,” OECD Chief Economist Catherine Mann said, according to a report from Bloomberg.
“We have revised up the U.K. a lot — look how effective monetary and fiscal policy were.”
In the full Interim Economic Outlook report, the OECD remains reasonably downbeat about the UK’s future economic prospects, writing:
“In the United Kingdom, the pace of expansion in 2016 was lower than in previous years, despite support from resilient household spending, actions by the Bank of England and adjustment to the fiscal stance following the Brexit vote. UK growth is expected to ease further as rising inflation weighs on real incomes and consumption, and business investment weakens amidst uncertainty about the United Kingdom’s future trading relations with its partners.”
In increasing its forecasts for the UK, the OECD joins the IMF, Bank of England, and European Commission in making the tacit admission of being too pessimistic in initial economic forecasts after the vote.
Alongside its forecasts for the UK, the OECD predicts that global growth will pick up to 3.6% in 3017, up from the previously forecast 3.3%, reflecting “continuing and expected combined fiscal and structural initiatives in the major economies – notably China, Canada and the United States – together with a slightly more expansionary stance in the euro area.”
On a state-by-state level, there were increases in the 2017 forecasts for the USA, Germany, France, Italy, Japan, Canada, and China.
You can see the OECD’s full breakdown here: