OECD accused of misleading figures after predicting UK to shrink

The OECD has been accused of a misleading “standard global blob view” after forecasting that Britain will be the only economy other than Russia to shrink this year.

Germany, Argentina, Turkey and South Africa will all outperform the British economy in 2023, according to the Paris-based Organisation for Economic Co-operation and Development, an intergovernmental organisation of 38 member countries.

The OECD forecast that the UK’S GDP will contract by 0.2pc in 2023, in line with the Office for Budget Responsibility’s expectations. But what was remarkable about the OECD’S forecasts was how badly Britain compares with other nations.

Official data shows that German GDP is already falling – it shrank by 0.4pc in the last three months of 2022 – while UK GDP was flat over the same period, and grew 0.3pc month on month in January.

Martin Beck, chief economic adviser to the EY Item Club, said: “It doesn’t make any sense. They have been overly negative for a long time on the UK and this is just doom and gloom again.”

The UK was hit harder than other countries by the energy crisis because it is more dependent on gas, but this should mean it will now recover more quickly as energy prices fall, Mr Beck said. “The OECD takes the downside when prices are rising but they don’t reflect the upside.”

He added: “They have to go through so much bureaucracy before they release that their forecasts are based on rate expectations and energy prices that are a few months out of date. They often don’t reflect the latest developments, which aside from the banking crisis, have been good.”

Mathias Cormann, secretary-general of the OECD, blamed the UK’S stronger cost of living pressures, higher retail energy prices and slower wage growth for the poor forecast performance.

But the OECD expects that the UK will perform worse than Argentina and

Turkey, where the headline inflation rates in 2023 are forecast to be 85pc and 44.6pc respectively. In the UK, inflation is forecast to be 6.7pc across this year.

Mr Cormann also signalled that Brexit was a key factor. He said: “There is continued uncertainty around future trade relationships.”

Julian Jessop, an independent economist, said: “That is just the standard global blob view of these things.”

He warned that the OECD had an axe to grind, saying: “They are biassed against anything like Brexit, which is unorthodox. And also they are very slow to respond to changing events.”

He added: “At the beginning of this year, the German economy looked a lot weaker than the UK economy. And it’s actually seeing larger falls in real wages. Real wages in Germany have fallen in each of the last three years.”

The OECD was more optimistic than the Bank of England, which in February forecast two years of falling GDP. But experts said timing of releases was key.

George Buckley, chief UK economist at Nomura, a global financial services group, said: “The further back in time you look over the last six months, the worse the forecast is going to be because we were effectively staring into the abyss back in September.”

Since then, the political situation has stabilised and energy prices have started falling. He said: “Things have turned out a lot better than they could have done for sure. So you know, the older the forecast, the more gloomy it might look.”

This partly explains the Bank of England’s outlook, as it was based on January data, he added. “If they were to do it now, would they be publishing a forecast of a 1pc recession? Possibly not.”