PARIS Nov 27 Britain's economy will grow much
more slowly than previously thought next year, and finance
minister George Osborne should be ready to abandon a key debt
target if growth weakens further, the OECD said on Tuesday.
The Organisation for Economic Cooperation and Development
(OECD) predicted that Britain's economy would shrink 0.1 percent
this year and grow just 0.9 percent in 2013 -- much weaker than
the 1.9 percent growth next year that it forecast in May.
While the downgrade in the OECD's forecasts brings them
broadly into line with those from private-sector economists, it
will still be bad news for Osborne, a week before he presents a
half-yearly economic update.
"Real GDP growth is projected to rise gradually during 2013
as falling inflation boosts purchasing power and private
consumption, and a brighter international environment supports
exports and investment," the Paris-based body said.
But it added that risks were mainly on the downside, noting
dangers from a weaker world economy, global financial turmoil,
blows to household and business confidence, and higher food and
The OECD indicated that if Britain's economic growth turns
out weaker than expected the government could ease its austerity
drive in the short term, even if that meant missing a key
target: to get the country's public sector net debt falling as a
share of national output by the 2015-16 fiscal year.
"In the event of lower than expected growth, the flexibility
of the fiscal mandate should be utilised to allow the automatic
stabilisers to continue to operate, even though this may imply
pushing out the debt target," the body said.
Medium-term structural consolidation plans should be
maintained "to ensure credibility", it added.
There is room for the government to change the composition
of its spending to focus on long-term growth-enhancing public
investment, including in infrastructure, the OECD said.
The agency left its consumer price inflation forecasts
unchanged at 2.6 percent in 2012 and 1.9 percent in 2013.