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Budget 2017: growth slashed on productivity gloom

The Office of Budget Responsibility has slashed its expectations for UK economic growth.

Budget 2017: growth slashed on productivity gloom

The Office of Budget Responsibility has slashed its UK growth expectations over the five-year term of its forecast horizon, with its 2018 estimate dropping from 1.6% to 1.4%, matching consensus expectation.

A substantial long-term downgrade had been widely expected, following last month’s admission by the OBR that sub-par productivity growth since the financial crash was likely permanent, not cyclical.

Its 2019 forecast fell from 1.7% to 1.3%, 2020 from 1.9% to 1.3% and 2021 unchanged at 1.5%.

Having repeatedly predicted a bounce in UK productivity - which has lagged both peer economies and its own historical performance since the crisis - the OBR in an evaluation of its forecasts last month admitted that it had been holding out for a recovery which now appeared unlikely to arrive.

‘Other things being equal, a downward revision to prospective productivity growth would weaken the medium-term outlook for the public finances,’ it wrote.

‘The downward revision to productivity is likely to have the largest quantitative impact’

1 comment so far. Why not have your say?

Andrew Stevenson

Nov 23, 2017 at 12:26

There seem to be as many methods of measuring productivity as there are economists, and about as much as the latter.

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