OECD upgrades UK's growth forecast
1:54pm Tuesday 6th May 2014 in © Press Association 2014
A respected international think-tank has upgraded its growth forecast for the UK to 3.2% this year - but warned that action may be needed to cool the housing market.
The Organisation for Economic Co-operation and Development (OECD) revised its estimate from 2.4% last November, saying it believed the recovery had now "taken hold".
But it cautioned that consumer spending remained the main driver of growth, and urged the Government to consider measures to ensure "balanced" house price rises.
Globally, the body reduced its 2014 growth forecast from 3.6% to 3.4%, with the US and China downgraded to 2.6% and 7.4% respectively.
OECD secretary-general Angel Gurria said: "We are still not out of the woods yet."
The document added: "The underlying picture continues to be of strengthening growth momentum in the major advanced economies.
"However, still-high unemployment in many countries and the subdued pace of growth in many emerging market economies relative to past norms are likely to limit the momentum of the recovery."
The OECD said the recovery in the UK had "taken hold" and growth was now "robust", although it noted that consumer spending was still the main driver.
"Policy interest rates are expected to begin to rise in 2015 as economic slack narrows and inflation pressures gradually build up," the report said.
"Further prudential regulation measures should be considered to ensure a balanced housing market recovery."
The Treasury has come under fire over the Help to Buy scheme underwriting home loans for people without large deposits, amid strong price growth - particularly in London and the South East.
The OECD added: "Despite supportive monetary and financial conditions and gradually strengthening external demand, the contribution of a business investment and exports to growth has remained modest.
"The current account deficit has widened as net external income and exports have disappointed."
A Government spokesman said the growth estimates were the highest for any major developed economy and showed Britain was "coming back".
"The impact of the Great Recession is still being felt, but the foundations for a broad-based recovery are now in place. The biggest risk to economic security would be abandoning the plan that is laying those foundations," the spokesman added.
Posting on Twitter, Prime Minister David Cameron said the revision was a "sign our #LongTermEconomicPlan is working, meaning security #ForHardworkingPeople".
Chancellor George Osborne, attending a meeting of EU finance ministers in Brussels, said: "These forecasts from international bodies, the OECD, the rest of the European Union, are a real vote of confidence in the UK's long-term economic plan.
"They show Britain growing faster than most other economies in the world. And of course they point to risks in the global economy.
"They point to the need for us to go on working through our long-term economic plan and build that resilient economy that I talked about at the Budget."
Asked if he believed Help to Buy needed to be curbed, Mr Osborne replied: "I've said we should be vigilant about the housing market and this Government has given the Bank of England the powers, the tools, to do that in an independent way.
"That didn't exist before but we've learnt from the mistakes of the last government and the Bank of England has the tools and independence to do what it feels it needs to do to help to contribute to building that resilient economy."