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The UK’s gross domestic product will grow by 3.6% this year but stagnate in 2023 due to the cost of living crisis, the wealthy economy organization predicts. People will spend less as inflation squeezes their finances, while business investment will be dampened by high interest rates and continued economic uncertainty. The OECD said the government “should consider slowing fiscal consolidation to support growth”, while doing more to protect individuals and businesses from the ravages of rising prices.

The Paris-based forecaster also said the government should set out a clear plan and timetable to decarbonize the economy to boost investment, support jobs and energy security.

He said: “Fiscal policy must balance gradual fiscal tightening with targeted support to protect vulnerable households from rising costs of living and large expenditures, and investments must support productivity.

“Government programs should focus on ensuring the transition to net zero to support investment and accelerate the reduction of reliance on fossil fuels.”

Britain’s forecast is the worst of the group of G20 nations, barring Russia.

The OECD has warned that it could be even worse with a protracted war in Ukraine and energy prices remaining high. He warns that a prolonged period of acute supply and labor shortages could permanently affect businesses’ ability to operate.

The think tank said the world would pay “a high price for Russia’s war on Ukraine”. He estimates that the conflict will cause growth in 2022 to fall from the 4.5% he forecast in December to 3% and 2.75% next year.

Michael Hewson, chief market analyst at CMC Markets, said the sharp global assessment from the OECD had unnerved markets.

He said: “The fact that the risks to the global economy, particularly in Europe and the UK, are clearly defined seems to have caused heightened anxiety among investors sending higher yields and lower stock markets. .”