OECD Estimates UK Economy Recovery to Extend until 2016

A revival in consumer spending and business investments point to a UK recovery extending into 2016, predicts the Organization for Economic Co-operation and Development (OCED). The recent growth experienced by recently stagnant UK economy expects to clock a decent 3% growth by the end of this financial year, and OCED has forecast an optimistic future couple of years.

A revival in consumer spending and business investments point to a UK recovery extending into 2016, predicts the Organization for Economic Co-operation and Development (OCED). The recent growth experienced by recently stagnant UK economy expects to clock a decent 3% growth by the end of this financial year, and OCED has forecast an optimistic future couple of years.

In a statement issued by the Paris based economic thinktank, growth is expected to be somewhere around 2.7% in 2015 and 2.5% in 2016. Although that is a downward trend from the current year, the fact that UK expects to retain its forward momentum is news to cheer about for the financial stakeholders.

A positive economic outlook that builds on a strengthening present

The core reasons behind the recent surprise revival of the UK economy have a long-term impact, which explains the positive outlook by the credible economic analysis body. The twin factors of strong job creation and a vast pool of employment opportunities across the nation, along with charged up consumption patterns recorded in the past quarter, are strong contributors to the UK economy. Business investment has also seen appreciable growth, and is another shot in the arm for an economy that has seen more stress than it would have ever predicted a decade back.

With diminishing uncertainties in the financial environment, investments expect to continue, which bodes well for the economic health of the country. The latest economic report card and outlook from the OECD predicts that GDP growth will manage to continue despite fiscal consolidation, and in spite of high probability of a slowing growth rate.

Potential showstoppers that need strong monitoring and correcting

Whereas there is a lot to cheer about for the stakeholders in UK economy, some contentious issues need monitoring, and are imperative to the sustainability of this positive wave. To begin with, the slump in manufacturing and export sectors is a growing headache for the finance ministry, as the current account deficit is now near 5% of GDP. Subpar Eurozone growth for the immediate future could aggravate the export doldrums.

Also, wages have not picked up to any appreciable level for some time now, and the consumption build up will find it hard to continue if that’s not corrected. Wage adjustments expect to help balance growth and higher productivity across industries. Failure to ramp up productivity could threaten growth and create a disconnect between real wage growth and productivity. This is because labor market pressures could even ignite inflation concerns. The OECD has also gone as far as suggesting an interest rate increase in 2015 to balance some of the new job growth.

Many people believe the UK could even see more job growth if they did not have a socialized health care system, which is economically draining on any country, and if they lowered their taxes for businesses and workers.