The Office of Budget Responsibility has downgraded its growth forecasts and says that Government borrowing will fall more slowly than previously expected.
Data released by the independent forecaster alongside the Chancellor’s autumn statement predicts the economy will grow by 0.9 per cent in 2011, 0.7 per cent in 2012 and 2.1 per cent in 2013. It says the economy will grow by 2.7 per cent in 2014, 3 per cent in 2015 and 3 per cent in 2016. The OBR’s March projections were 1.7 per cent for 2011, 2.5 per cent for 2012 and 2.9 per cent for 2013. In November 2010 it expected 2.3 per cent growth for this year and 2.8 per cent for 2012.
The Economic and Fiscal Outlook also shows the reduction of Government borrowing is slowing down. They predict borrowing for 2011 will be £127bn falling to £53bn in 2015. The OBR’s March forecast expected Government borrowing to fall from £121bn in 2011 to £29bn in 2015.
The OBR says public borrowing will be £127bn in 2011, £120bn in 2012, £100bn in 2013, £79bn in 2014, £53bn in 2015, and £24bn in 2016.
The OBR’s previous reports on the state of the public finances have warned that weak demand and slow growth would affect Government borrowing, suggesting the new lower estimates could further slow efforts to reduce borrowing. The Chancellor has said that the cost of UK Pic borrowing on the markets has been kept low by the “credibility” of the Government’s deficit reduction programme.
Osborne said the OBR’s predictions assume that the eurozone finds a way through its current crisis and policy makers find a solution which delivers sovereign debt sustainability.
He said: “If they do not then the OBR warns there could be a much worse outcome for Britain. I believe they are right, we hope this can be averted. But if the rest of Europe heads into recession it may be hard to avert one here.”
He said the Government is undertaking extensive contingency planning for all potential outcomes to the Euro crisis.
Yesterday, the Organisation for Economic Co-operation and Development said it expects the UK economy to shrink over the next two successive quarters, officially putting the country into recession. It said the economy would shrink by 0.025 per cent in Q4 of 2011/12 and by 0.15 in Q1 of 2012/13. However, it projects growth of 0.9 per cent this year, 0.5 per cent next year and 1.8 per cent in 2013.
Earlier this month the Bank of England’s inflation report said “the prospects for the UK economy have worsened” and that growth in 2011 or 2011 is unlikely to exceed 1 per cent. The Bank also cut its forecast for 2013 from 3 per cent to 2.5 per cent.
In August, OBR chairman Robert Chote (pictured) said he expected growth for 2011 to fall short of the 1.7 per cent his organisation set out in March. That figure was itself downgraded from the organisations November 2010 projection of 2.1 per cent growth for 2011 in the OBR’s Economic and Fiscal Outlook published alongside March’s Budget.
The OBR was set up by the Government after the 2010 election to produce independent figures on Government finances.
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