In its interim report published yesterday, the OECD said GDP expanded at an annualised pace of two per cent in the first three months of the year and predicted 3.1 per cent annualised growth in the second quarter. At that rate, the UK would outstrip all other G7 nations apart from Canada.
The estimates will prove a headache for the Conservatives as they are more bullish than the 1.25 per cent output forecast for the year in last month’s Budget.
Last night chancellor Alistair Darling seized on the numbers, which he said vindicated the government’s handling of the economy.
“The OECD says that we have set the country on course for faster growth in the coming months – but only if we don’t cut support too soon,” he said.
The Paris-based institute indeed warned against premature withdrawal of fiscal and monetary props from central authorities, citing frail labour markets and ongoing vulnerability in the global banking system.
But it added that countries which have taken on high levels of debt, such as the UK, need to provide a clear budget deficit reduction plan.
The report said: “Consolidation should start in 2011, or earlier where needed, and progress gradually so as not to undermine the recovery.”
Separately, the Bank for International Settlements (BIS) issued a sterner caution on Britain’s huge debt pile. BIS warned the interest bill on the UK’s borrowing would double to 10 per cent of GDP within a decade, urging Labour to tighten its plan to cut the deficit by 1.3 per cent of GDP annually for the next three years.