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Budget 2017: Government’s economic forecasts revised down significantly

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By admin , in Money , at November 22, 2017

Government forecasts have been significantly revised down following a belated acknowledgement of the UK's poor productivity performance since the financial crisis.

The British economy will grow by 1.4 per cent in 2018, much lower than previous forecasts of a 1.6 per cent expansion, according to forecasts from the Office for Budget Responsibility (OBR) announced today by chancellor Philip Hammond in the Autumn Budget announcement.

The economy's expansion in 2019 will only be 1.3 per cent, down from previous expectations of 1.7 per cent. The downgrade in 2020 was even larger, from 1.9 per cent to 1.3 per cent.

Read more: Deficit hangs over Hammond: Chancellor facing new £20bn black hole says IFS

Hammond seized on the OBR's prediction that there would be more than 600,000 jobs by the end of the forecast period, but that was not enough to distract from dismal productivity predictions.

"Regrettably, our productivity performance continues to disappoint," Hammond said.

The productivity downgrade had been widely expected after the OBR last month said it expected to "significantly" reduce its long-term forecasts for rate of efficiency of the UK economy. The OBR had assumed in 16 successive forecasts that productivity would improve to pre-financial crisis levels, but finally accepted it is unlikely to bounce back up a decade on.

Actual productivity growth averaged 2.1 per cent a year in the pre-crisis period, but has averaged just 0.2 per cent over the past five years. In March that productivity growth was predicted to rise slowly to reach 1.8 per cent annually in 2021.

Read more: Office for Budget Responsibility to slash productivity growth forecast

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