MNI BRIEF: UK Budget: No Recession Seen, Debt Rule Just Met
UK OBR no longer predicts recession despite negative growth through 2023 and sees debt-to-GDP rule narrowly met in Budget forecasts.
The UK is only just on track to meet the government's debt target, of having debt-to-GDP falling in five years' time, and to meet its borrowing rule, according to Office for Budget Responsibility unveiled in the Budget statement by Chancellor of the Exchequer Jeremy Hunt.
The OBR also dropped its forecast for the UK to move into technical recession, with two consecutive quaters of negative growth, instead forecasting a decline of just 0.2% for the year compared to its November estimate of a 1.4% contraction with the economy then expected to expand by 1.8% in 2024, 2.5% in 2025, 2.1% in 2026; and 1.9% in 2027, markedly more optimistic than the Bank of England has predicted.
Hunt said that the OBR has forecast underlying debt of 92.4% of GDP in 2023-24, 93.7% in 2024-25, 94.6% in 2025-26, and 94.8% in 2026-27, before falling to 94.6% in 2027-28, a fall of just 0.2 percentage point in the fifth year, a buffer compared to the target of GBP6.5bn. The buffer against the borrowing target, of net borrowing being below 3% of GDP over the five year period, was markedly larger, at GBP39.2 billion.
The OBR forecast borrowing would drop from 5.1% of GDP in 2023-24 to 3.2% in 2024-25 down to 2.8% in 2025-26, 2.2% in 2026-27 and just 1.7% in 2027-28. Hunt also said that the OBR has forecast headline CPI inflation would fall to 2.9% by the end of 2023 from 10.7% in Q4 2022. The OBR's forecasts back in November were for a CPI inflation heading from 7.4% this year down to 0.6% in 2024 and -0.8% in 2025.