OECD think-tank cuts UK and world growth prospects with call for urgent action
Growth prospects in the UK and global economy have been slashed as the Organisation for Economic Co-operation and Development (OECD) called for "urgent" action to boost flagging growth.
In its latest Economic Outlook, the Paris-based OECD cut its forecasts for growth in the UK to 2.2% in 2016 and 2% in 2017, down from previous expectations for 2.4% and 2.3% respectively.
It also took the axe to global growth predictions, at 3% for 2016 against the 3.3% pencilled in last November.
The well-respected think tank warned policy responses were needed to bolster the global economy as trade and investment weakens and sluggish demand is leading to low inflation and "inadequate" wage and employment growth.
It said: "Global GDP growth in 2016 is projected to be no higher than in 2015, itself the slowest pace in the past five years.
"A stronger collective policy response is needed to strengthen demand. Monetary policy cannot work alone," it added.
The warning comes after a dire start to the new year on financial markets amid global growth fears and as oil prices have plunged.
Banks have seen a sharp shares sell-off on concerns they are unable to withstand the shock of a global slowdown.
Chancellor George Osborne said the OECD forecasts are "another demonstration of the cocktail of risks facing the world this year".
"It is not surprising that this is expected to have an impact on growth in the UK, though thanks to our economic plan we are forecast to be the fastest growing of the G7 economies this year," he said.
The OECD reduced growth estimates for every member of the G7 group of leading industrial nations - the US, UK, Germany, France, Italy, Japan and Canada.
It called on a number of countries to ease up on austerity measures and instead look to make use of cheap borrowing costs to spend on infrastructure.
"Quality infrastructure projects would help to support future growth, making up for the shortfall in investment following the cuts imposed across advanced countries in recent years," it said.
The report also raised concerns that ultra low interest rates and quantitative easing money-boosting measures were no longer effective alone in helping economies.
But the OECD added monetary policies should be "highly accommodative", with low interest rates remaining until inflation picks up.
A growing number of countries, including Japan, now have negative interest rates, but there are mounting concerns that this tactic will fail to increase growth.