Experts' View: what Budd's forecasts mean for the emergency Budget

The newly formed Office for Budget Responsibility has cut growth forecasts and trimmed some debt predictions but that doesn't mean there is less pressure to make far-reaching cuts, say financial experts.  

Azad Zangana, European economist at Schroders:

The OBR has slashed the Treasury’s previous growth forecast for 2011 from a central estimate of 3.25% to 2.6%, much closer to our estimate of 2.4%, and the latest consensus of 2.3%.

The financial crisis has left deep scars in the British economy. The OBR estimates the UK’s trend rate of growth to be 2.25% down from the Treasury’s previous assumption of 2.7%.

Permanent output lost during the crisis was higher than expected, and combined with an ageing population, is expected to reduce the UK’s trend growth further to just 2% from 2014.

One thing is for sure, the emergency budget is going to be tough, and certainly won’t be pretty.

Martin Weale, director of the National Institute for Economic and Social Research:

The most striking point about the forecast is that it shows cuts to government consumption delayed, compared to what the previous government had assumed.

This is no doubt one of the factors which lead to a short-term picture of the economy slightly more optimistic than many forecasters had assumed.

The National Institute’s view remains that we expect growth to be somewhat slower than the OBR has forecast with the consequence that the budget deficit is likely to be up to about ½ per cent of GDP higher by 2014-5 than OBR has forecast. 

Douglas McWilliams, chief executive of the Centre for Economics and Business research

The new forecasts remain well above the consensus of independent forecasts and even more so above our own views.