UK economy to grow more slowly, says OECD

rolls of steel in factory Last month, the OECD said the UK economy faced "significant headwinds"

UK economic growth will be slower over the next three months than previously predicted, according to a forecast from the OECD think tank.

In a survey of the G7 economies, the OECD estimated that UK gross domestic product would expand at an annualised rate of 1% in the second quarter.

This compared with an OECD forecast in November of 1.3%.

The OECD said the US economy was expected to expand by 3.4%, followed by France at 2.8% and Germany at 2.3%.

Japan's economy would be held back by the disaster that struck the country last month, the OECD said.

Last month, the organisation cut its UK growth forecast for 2011 as whole to 1.5% from 1.7% , saying the economy faced "significant headwinds" such as spending cuts and rising commodity costs.

However, the OECD also called the UK government's cutbacks "ambitious and necessary", saying they were needed in order to achieve a sustainable recovery.

'Instability' risks

The latest OECD report said that the G7 group of the richest nations, excluding Japan, was expected to see average annualised growth of 2.9% in the second quarter of 2011.

Japan, however, is likely to suffer a drop in GDP in the second quarter as a result of the devastation caused by the earthquake and tsunami.

The OECD estimates that Japan's economy might contract by between 0.2% and 0.6% in the first quarter of 2011, and by between 0.5% and 1.4% in the second quarter.

The Japanese authorities themselves estimate the disaster wiped between 3.3% and 5.2% from its annual growth, the OECD pointed out.

Despite economic improvements for the G7 bloc as a whole, the OECD warned that unemployment and inflation remains a problem.

And it added: "Instability in the Middle East and North Africa and an associated possible further increase in oil prices could act as a drag on economic activity in the near term."

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