Brexit uncertainties depressing British economic performance: OECD

LONDON, May 30 (Xinhua) -- Worries over the outcome and composition of Brexit are depressing Britain's economic performance, according to the Organization for Economic Cooperation and Development (OECD).

The OECD forecast on Wednesday in its Economic Outlook report that the British economy would grow by 1.4 percent this year, a figure described as "modest" in the report.

Growth in 2019 is forecast at 1.3 percent of GDP.

Several years of strong growth mean that there is little slack in the British economy, with unemployment forecast to remain below 5 percent, with near record numbers of jobs and a low in unemployment not seen since the mid 1970s.

However, the British economy has underperformed its OECD peers, the report noted, with the United States forecast to grow at 2.9 percent this year and the eurozone forecast for 2.2 percent.

"The British economy has deteriorated since mid 2017. While most of the other OECD economies have picked up," Annabelle Mourougane, senior economist at the OECD, told Xinhua on Wednesday afternoon.

There are several reasons for the divergence between the eurozone and U.S. economies and the British economy.

"The first is political uncertainty which is holding back investment, and most of that is related to uncertainties around the Brexit negotiations, there is no clear view of what is going to happen," said Mourougane.

"Second, there has been a major depreciation in sterling since the Brexit referendum in June 2016 and the effect on inflation has to increase it quite substantially."

Consumer price index (CPI) inflation was 0.5 percent before the 2016 Brexit referendum vote but markets made a 20 percent reduction in sterling in the wake of the vote to leave the European Union (EU).

Sterling depreciation forced inflation quickly up to a peak of 3.1 percent in November last year, but it has subsequently declined to 2.2 percent in April, the latest figure.

"Inflation has come down recently but has been high and has eroded household incomes," said Mourougane.

First quarter growth in Britain slumped to just 0.1 percent quarter on quarter.

Mourougane commented: "The first half of the year was very weak, with an additional effect from bad weather which has clearly contributed, but it is difficult to quantify. I would say it was part of the decline in recent economic performance." Enditem