Lance Forman warns European economy ‘bound to crack’
An economist has debunked gloomy predictions for the British economy in 2023. Economist Julian Jessop pinned the blame on “Brexit pessimists” after the latest forecasts from the Organisation for Economic Co-operation and Development (OECD) reveal a sharp downgrade for the UK economy, which is expected to shrink by 0.4 percent in 2023 and grow by just 0.2 percent in 2024. It had predicted in September that UK growth would flatline in 2023.
Germany is the only other G7 country set to see a contraction in gross domestic product (GDP) next year, with a 0.3 percent drop, according to the report.
Italy will see only paltry growth of 0.2 percent, while the United States will eke out 0.5 percent expansion, with GDP set to rise by 0.6 percent in France and 1 percent in Canada and 1.8 percent in Japan.
The UK is also the third worst performing nation of all the G20 advanced countries worldwide, with only Russia and Sweden seeing a bigger decline in GDP, at 5.6 percent and 0.6 percent.
When compared with the average of all the world economies, the UK’s performance is set to trail behind the 2.2 percent in global growth predicted for next year, but this is still a sharp slowdown on the 3.1 percent expected in 2022 due to the energy crisis and trading sanctions sparked by Russia’s war on Ukraine.
Addressing the latest OECD data, John Kampfner, Executive Director of UK in the World Initiative at Chatham House, told VOA news: “In Britain they are compounded by a series of ideologically driven governments whose competence was very much open to question, culminating in the disastrous 45 days of Liz Truss.
The UK is the third worst performing nation of all the G20 advanced countries worldwide (Image: Getty)
Brexit: UK’s trade landscape post-EU (Image: Express)
“Brexit was camouflaged by the pandemic in 2020/2021, so the direct consequences of many of the Brexit decisions couldn’t be discerned.
“They are now eventually and belatedly being seen.”
But debunking his analysis, Economist Julian Jessop told Express.co.uk: “The OECD’s forecasts are only forecasts and are not particularly reliable. But they are at least less pessimistic than those from the, which is expecting UK GDP to fall by 1.4 percent in 2023.
“The initial impact of Brexit has been negative because it has disrupted trade and depressed business investment.
“However, the hit has been far smaller than many feared. It is notable that Brexit pessimists need to rely on forecasts and complicated mathematical models, rather than simply looking at the actual data on growth and inflation since the vote to leave the EU.”
The Office for Budget Responsibility (OBR), the official UK economic forecaster, has warned MPs that “2023 is going to be a very difficult year” for households as bills continue to rise.
OBR committee member David Miles issued the stark warning days after the body forecast the UK faces a recession lasting more than a year.
Mr Miles said the impact of rising interest rates and continued inflation will cause pressure next year, but they are predicted to turn a corner moving into 2024.
Speaking to the Treasury Committee, the economist said: “2023 is going to be a very difficult year, very likely, but the years after it will not be quite as bad.”
Nevertheless, the forecasting body’s latest economic forecasts still appear more optimistic by those revealed by the Bank of England earlier this month.
OBR chair Richard Hughes said its longer-term growth projections are more positive as interest rate expectations and energy price futures declined between the two forecasts.
The OBR also said it is predicting that more people will use their savings to support spending habits despite continued cost-of-living pressures.
Mr Hughes also told MPs on the committee that governments should not make fiscal decisions without an “up-to-date economic outlook”, following the economic fallout of former prime minister Liz Truss’s mini-budget.
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Ms Truss and former chancellor Kwasi Kwarteng came under fierce scrutiny in September after they announced a raft of tax cuts and spending measures without economic forecasts.
The pair told Mr Hughes on September 7 that they would not seek economic forecasts for a fiscal announcement on September 23.
However, concerns over the unfunded nature of the fiscal announcement and a lack of clarity over the economic outlook caused the pound to slide to a record low against the US dollar.
Ultimately, the economic turmoil contributed to the short tenure of the Truss government, with the spending plans largely reversed by new chancellor Jeremy Hunt.
On Tuesday, Mr Hughes said: “The committee in its own reports has commented on the growing tendency in UK fiscal policy making for major policy announcements to happen without forecasts.
“Good practice as defined by anyone, not just us but international institutions, would say you shouldn’t make fiscal decisions without them being informed by an up-to-date view of the economic outlook.”