Investing.com -- The Organisation for Economic Co-operation and Development (OECD) has revised its growth forecast for the UK economy in 2025, projecting an improved outlook compared to earlier estimates.
This adjustment reflects the UK’s resilience amid global economic uncertainties and aligns with its broader strategy to stimulate growth through fiscal policies and structural reforms.
According to the latest OECD Economic Outlook, the UK economy is expected to grow by 1.7% in 2025, an upward revision from earlier predictions.
This improved forecast is attributed to several factors, including stabilizing inflation, improved labour market conditions, and continued recovery in real household disposable incomes.
The OECD flags that the UK’s economy has been bolstered by strong domestic demand and a gradual return to pre-pandemic activity levels in key sectors.
One major driver of the revised forecast is the projected moderation in core inflation, expected to fall to 2.8% in 2025 and further to 2.3% in 2026.
This easing of inflation pressures has created a more favorable environment for consumer confidence and private consumption, despite ongoing fiscal tightening measures.
Additionally, real income gains and targeted public expenditures, such as those announced in late 2024, are anticipated to provide further support to economic activity.
The UK’s growth trajectory remains underpinned by robust employment figures, although the OECD cautions about persistent structural challenges in the labour market, particularly related to skill shortages and demographic trends.
In addressing these issues, policies focusing on upskilling the workforce, boosting labour mobility, and fostering greater participation among underrepresented groups are emphasized.
While the outlook is more optimistic, the OECD notes that the UK economy faces risks from global trade uncertainties and potential geopolitical tensions.
Nonetheless, the revision reflects a broader trend of cautious optimism for advanced economies as inflation pressures subside and monetary policies shift towards a less restrictive stance.
The OECD's updated projections for the UK suggest a cautiously improving economic environment, with policy adjustments playing a critical role in sustaining recovery and fostering long-term resilience.