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In its latest biannual global economic outlook, the Paris-based international organisation also called for more global public borrowing and infrastructure investment.
The OECD has traditionally supported the policies of the government of the day, so its departure from the normal script is notable. It strongly backed the austerity policies of former UK prime minister David Cameron and then-chancellor George Osborne between 2010 and 2015.
In its economic projections published on Wednesday, the OECD followed other forecasters in revising up its forecasts for economic growth in 2017, from 1.2 per cent in its November economic outlook to 1.6 per cent.
But while the international organisation upgraded many of its economic forecasts for other countries in 2018, it held the UK outlook constant at 1 per cent growth. The OECD now expects Italy will be the only G7 leading economy to perform worse than the UK next year.
The gloomy outlook stems in part from the OECD’s assumption that the UK will leave the EU without a comprehensive free-trade agreement to replace the EU single market, and the expectation that the UK will trade on more restrictive World Trade Organisation terms from April 2019.
“The uncertainty, and the assumed outcome, is projected to undermine spending, in particular investment,” the OECD said on Wednesday.
“Policies have supported private confidence and consumption, but household spending is projected to ease as the combination of a weakening labour market and higher inflation reduces real wage growth,” it added.
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OECD Economic Outlook June 2017