Slow growth forecast for UK economy

Influential think-tank the Organisation for Economic Co-operation and Development (OECD) believes the UK’s economy will grow more slowly over the next quarter than that of any other G7 country apart from catastrophe-stricken Japan.

The OECD estimates that the UK’s gross domestic product (GDP) will grow by an annualised rate of 1% in the second quarter of 2011, compared with its previous forecast of 1.3% in November.

Last month the OECD slashed the UK’s growth forecast for 2011 to 1.5% from 1.7% as the economy faces “significant headwinds” such as spending cuts and rising commodity costs.

The latest figures make sobering reading for the UK, because the G7 group of the richest nations in the world excluding Japan, are expected to grow by an average annualised rate of 2.9% in the second quarter and many of the countries have seen their growth upgraded.

The US economy is expected to expand by 3.4%, followed by France at 2.8% and Germany with 2.3%.

Japan, however, is likely to suffer a drop in GDP in the second quarter as a result of the devastation caused by the earthquake and tsunami.

The OECD said it believes that the UK economy grew faster than expected in the first quarter of 2011, as it bounced back from the 0.5% contraction at the end of last year, which was disrupted by December’s Arctic weather.

The economy grew at an annualised rate of 3% in the quarter, which is more than four times the rate it previously estimated.

The OECD’s report notes that the underlying momentum in economic growth in most countries appears stronger than in recent projections and was masked by the bad weather at the end of 2010.

However, it warns that further instability in North Africa and the Middle East could drive up the price of oil, which could act as a drag on the recovery in the near term.