OECD chops its UK forecasts ­as the Eurozone crisis rumbles on

Tim Wallace
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BRITAIN’S economic growth forecasts were slashed by the OECD yesterday, in a sign that chancellor George Osborne will face lower tax revenues and a higher benefits bill than he may have hoped for, hitting his chances of meeting his deficit targets.

The think tank cut the UK’s forecast to 0.9 per cent growth in 2013, down from 1.9 per cent in its previous estimate six months ago.

But even the reduced estimate puts Britain’s economy in a better position than France’s or Germany’s, which are set for growth of just 0.3 per cent and 0.6 per cent respectively.

The OECD chopped back its global growth forecast too, from 4.2 per cent to 3.4 per cent for 2013.

It largely blamed the ongoing Eurozone crisis, as well as fears that politicians will fail to avert the US fiscal cliff, both of which are hitting confidence.

But despite the sustained pressure on growth, the report backed the thrust of the UK’s deficit reduction programme.

“With the fiscal deficit and public debt still high, the policy of fiscal consolidation remains appropriate to ensure the sustainability of the public finances,” the OECD said.

“Recent and planned structural reforms, especially on planning and work incentives, should boost growth over time.”