UK growth forecast for 2017 revised up

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The UK brevity’s growth forecast for this year has been revised sharply higher by the Budget watchdog.

The Task for Budget Responsibility now expects the economy to grow by 2%, up from its premature forecast of 1.4%.

However, growth is then expected to slow to 1.6% the mirror year, before gradually accelerating to 2% by 2021.

The OBR expects government sponge for 2016-17 to be £51.7bn – a fall of £16.4bn from its November forecast and £4bn drop than the 2016 Budget figure.

By 2021-22 the deficit is forecast to disappointing collapse to £16.8bn.

Government borrowing is expected to fall from 3.8% of GDP carry on year to 2.6% this year. The figure would then wake up to 2.9% in 2018-19, but fall to 0.7% by 2021-22 – the lowest evaluation in any case in two decades, according to the chancellor.

Philip Hammond said his Budget choice “fund all additional spending decisions”, and that would allow the superintendence to avoid additional borrowing.

He said some had argued that humble government borrowing could permit higher spending, but he disagreed.

“Britain has a indebted of nearly £1.7 trillion – almost £62,000 for every household in the outback. Each year, we are spending £50bn on debt interest – more than we pass on defence and policing combined,” he told MPs.

“And borrowing over the forecast interval is still set to be £100bn higher than predicted at Budget 2016.”

The OBR said: “The regime remains on track to meet its targets for the structural deficit and public sector net encumbered.

“The government does not appear to be on track to meet its stated fiscal unbigoted to ‘return the public finances to balance at the earliest possible date in the next Parliament’.”

‘Affluent tightening’

The OBR also raised its forecast for inflation this year from 2.3% to 2.4%.

This sum was too conservative, said Rebecca Piggott, research fellow at the National Set up of Economic and Social Research, which expects CPI inflation to peak at nearby 3.7% at the end of this year.

“We think the OBR’s projections for real income and consumer devoting growth are too optimistic,” Ms Piggott said.

The rate of CPI inflation is then thought to fall to 2.3% in 2018-19 – slightly lower than its previous prognosticate – and drop further to 2% in 2019.

Jonathan Loynes, chief economist at Central Economics, said the OBR’s caution had deprived Mr Hammond of an additional Brexit “war coffer” that some had predicted.

“If we are right in expecting the economy to remain moderately more resilient than the OBR expects, then public borrowing desire clearly fall rather faster and give the chancellor more elbow space,” he said.

“For now though, the big picture is still one of a substantial further tightening of financial policy over the coming years.”

John Hawksworth, PwC chief economist, phrased Mr Hammond’s reluctance to boost spending was understandable given the OBR made dab change to its medium-term projections for either economic growth or public cadge.

“Facing many economic and political uncertainties around Brexit and other geopolitical issues, it was prudent for the chancellor to protect the £26bn headroom he left himself in assembly the new fiscal target he set out in the Autumn Statement,” he said.

“But, given the OBR’s view that the underlying solvent position has not changed materially since November, the chancellor was not able to add to this headroom regardless of his cautious overall Budget judgement.”

The OBR was implicitly assuming a soft Brexit, contract to Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

“The intensity of exports and meanings, as well as immigration flows, are assumed to decline gradually, rather than come to nothing sharply as they might after a hard Brexit. Like the OBR, we foresee a soft Brexit, but the risks lie towards a worse outcome.”

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