World's biggest economies 'grinding to a halt'

Chancellor George Osborne today blamed negative international factors for the slowdown in the British economy, as a respected global think-tank predicted UK growth will stutter to a near-halt over the coming months.

The Organisation for Economic Co-Operation and Development (OECD) forecast annualised growth of just 0.3% for the UK in the final quarter of 2011, in a report which painted a gloomy picture of prospects for most of the world's biggest economies.



If it turns out to be correct, the OECD's forecast would complete a steep decline in annualised growth from 2.5% in the third quarter of 2010 to 0.7% in the second quarter of 2011, 0.4% between July and September and 0.3% in the last three months of this year.



In a mark of continuing concern over the sluggish recovery, the Bank of England's Monetary Policy Committee again held interest rates at a record low of 0.5% today, though the bank held off from printing more money to stimulate the economy through "quantitative easing".



Shadow chancellor Ed Balls called on Mr Osborne to ease up on austerity measures in the hope of bolstering fragile demand and said the Chancellor should use this weekend's meeting of G7 finance ministers in France to seek agreement on a global plan for growth.



But Mr Osborne said that the argument that slower-than-expected growth was caused by the Government's deficit reduction programme was "for the birds".



Instead, he said that countries throughout the world were being affected by factors beyond Britain's control, such as high oil prices, the sovereign debt crisis in the eurozone and concerns about growth in the US.



"The forecasts we got from the OECD today show that this is a problem for many advanced economies. There was a revision down in their forecast for growth for virtually every developed economy," said the Chancellor.



"We can look at the various short-term problems... but actually the real issue here is the long-term one, which is the big overhang of public and private debt from a decade-long boom that went unchecked.



"Unfortunately, the recovery from this is slower and takes longer than recoveries from previous recessions.



"I think Britain has put in place the right policy mix."



The OECD interim economic assessment is designed to check if projections made in its last economic forecast are on track. In May, the body downgraded its estimate for UK GDP growth in 2011 to 1.4% and 1.5% for 2012.



While OECD chief economist Pier Carlo Padoan encouraged governments to continue with fiscal tightening, he encouraged them to ease up when possible.



Mr Padoan admitted world economic growth was turning out to be much slower than the body thought it would be three months ago.



He said: "There's a clear drop in confidence in both business and households which reflects what they see as lack of policy response from governments."



The OECD recommended that central banks keep policy rates at present levels and, barring signs of recovery, consider lowering rates when there is scope.



World trade stagnated in the second quarter, according to the assessment, partly due to supply disruptions in the fallout of the earthquake and tsunami in Japan.



There is a risk of high unemployment becoming entrenched, the think-tank warned, and governments should roll out policies to create jobs.



Looking ahead, growth levels are muted across the G7 nations, with Germany forecast to experience a 1.4% decline in GDP in the fourth quarter.



The dismal outlook for Germany is significant as the country was until recently leading the recovery in Europe with strong levels of GDP growth.



But figures suggest the country's economy is losing steam as GDP growth in the second quarter dropped to 0.2% on a quarterly basis.



A healthy UK economic recovery is dependent on the rest of the continent as Europe is the country's biggest trading partner.



Mr Balls said: "A year ago, while the Chancellor was saying he was cautiously optimistic and Britain was out of the danger zone, I warned that there was a hurricane building and this was not the right time to rip out the foundations of the house.



"And I am even more worried now about Europe, America and Britain than last summer.



"This is now a critical moment for the world economy. We urgently need some leadership from our Chancellor and the G7 meeting this weekend to agree a global plan for growth and more balanced plans to get deficits down in the medium term."



TUC general secretary Brendan Barber said: "It looks like the best we can hope for is bumping along the bottom for years to come.



"Spending cuts are choking off recovery. The UK, US and Europe must embrace policies for investment and growth rather than hoping someone else will."

PA

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003