The Office of Budgetary Responsibility (OBR) has marked up its 2018 growth forecast from 1.4% to 1.5% but marked down its forecast from 2021 onwards, contradicting expectations of sustained improved output.
The OBR left its 2019 and 2020 forecasts unchanged, with each on 1.3%. It now expects GDP in 2021 to stand at 1.4% and in 2020 at 1.5% however, versus 1.5% and 1.6% at the time of the November budget.
Chancellor Philip Hammond unveiled the update at his first stripped-down Spring statement, taking the place of the two major annual fiscal announcements instituted by predecessor Gordon Brown.
Director of the Institute of Fiscal Studies Paul Johnson noted on Twitter that the growth forecast remained weak. ‘To be clear - against a long term trend of at least 2% a year growth, after poor growth since 2008, and compared with growth across rest of OECD, these are not encouraging forecasts,’ he wrote.
The OBR also predicted that inflation has now peaked, as the rebasing effect of the 2016 fall in sterling washed through the system and would fall back to below its 2% target within 12 months.
The hit to growth at the further end of the forecast period meant that the OBR was able to downgrade its expected public sector net borrowing less than some may have hoped, after bumper tax receipts last year bought the day-to-day deficit close to zero.
Forecast cyclically adjusted net borrowing in 2017/18 has fallen from 2.3% of GDP to 2.2% and remains unchanged at 1.8% in 2018/19.
Thereafter it will come in above the November forecast however, at 1.6% in 2019/20 versus the earlier 1.5%, 1.3% in 2020/21 versus 1.1%, and 2021/22 unchanged at 1.1%.