The UK will have one of the highest inflation rates of any major developed economy this year, the Organisation for Economic Co-operation and Development (OECD) reported on Wednesday.
According to the forecast, British inflation, which only recently fell to single digits for the first time since last summer, will be higher in 2023 than nearly any G20 member except Argentina and Türkiye.
Although headline inflation in the UK declined to 8.7% in April from 10.1% in March amid cooling energy prices, food inflation has been stubbornly high. Grocery price growth reached 19.1% in April, which is the highest rate in more than 45 years, according to the Office for National Statistics.
The OECD predicted that even as Britain is expected to narrowly avoid a recession in 2023, higher interest rates are likely to dent economic growth and incomes in the coming months.
"The high interest burden on public debt and the recent drop in average debt maturity leave the public finances exposed to movements in bond yields," the OECD said in its Economic Outlook.
The Paris-based organisation expects the UK’s economy to grow by 0.3% this year and by 1% in 2024. It noted, however, that the forecast includes "significant risks."
Renewed increases in wholesale energy prices will “further squeeze real incomes given the United Kingdom's high dependence on natural gas. Faster-than-expected resolution of uncertainty regarding future trade relationships is an upside risk,” the forecast warned.
Responding to the OECD data, UK Chancellor Jeremy Hunt admitted that inflation was still “too high,” adding that “we must stick relentlessly to our plan to halve it this year. That is the only long-term way to grow the economy and ease the cost-of-living pressures on families.”
The inflation rate in Britain should average 6.9% by the end of the year, the report concluded.