OECD slashes British growth forecast over Brexit

[PARIS] Britain is poised to take a major hit next year from its momentous decision to leave the European Union, the Organisation for Economic Cooperation and Development (OECD) said Wednesday, halving its growth forecasts for the world's fifth-biggest economy.

The British economy will grow by one per cent in 2017, said the OECD as it published revised forecasts.

In its earlier forecasts in June, before the referendum, it had projected the economy would grow by two per cent.

Growth in 2017 is likely to be "well below the pace in recent years and forecasts prior to the referendum," the OECD said.

In addition, "uncertainty about the future path of policy and the reaction of the economy remains very high and risks remain to the downside".

The weaker outlook for Britain, the second-biggest economy in the European Union, will also push down global output, which is stuck in a "low-growth trap," the organisation warned.

Global growth is seen at 2.9 per cent this year, rising to 3.2 per cent in 2017, the OECD said, trimming both forecasts by 0.1 percentage points.

The effects of Brexit are offset by a "gradual improvement in major emerging market commodity producers," according to the OECD.

However, while the Brexit impact on the rest of the euro area has been "modest" so far, the OECD said the spillover will result in "more negative effects" next year.

The organisation downgraded its 2017 forecast for the 19-nation zone by 0.3 percentage points, projecting growth of 1.4 per cent after 1.5 per cent this year.

The key to avoiding significant economic problems will be quickly sorting out Britain's trading relationships with its partners, the OECD added.

AFP