Budget: Chancellor reveals 1.3% UK growth forecast for 2019, lower public debt
(ShareCast News) - Chancellor Philip Hammond revealed new downgraded forecasts for gross domestic product growth in coming years due to low productivity, with growth expected to slow to just 1.3% for two years over 2019 and 2020.
The Office for Budget Responsibility now forecasts GDP will grow 1.5% in 2017, before falling to 1.4% in 2018, down from its forecasts of 2.0% and 1.6% respectively earlier this year.
UK GDP is now also forecast to slow even further to a low of 1.3% for two years in 2019 and 2020, down from the 1.7% and 1.9% estimates published in March. GDP is then forecast to rise 1.5% in 2021 and 1.6% in 2022.
It was the first time in modern history that the official UK GDP growth forecasts were below 2% every single year over the forecast horizon.
But after a lower public deficit in recent months amid continued government austerity policies, OBR cut its debt forecasts and now expects debt to peak this year and then fall as a share of GDP, which Hammond said was "a turning point" for public debt.
Borrowing is forecast to be £49.9bn this year, down £8.4bn from the OBR's forecast in March, with borrowing then expected to fall in every year.
However due to lower GDP growth the forecast for next year was only trimmed slightly £39.5bn and increased to £29.6bn for 2019.
As a percentage of GDP, debt will peak at 86.5% of GDP this year, then fall to 86.4% next year and by 2022/23 is seen dropping to 79.1%.
The pound had dropped 0.1% to 1.3223 by 1300 GMT on Wednesday, midway through the Chancellor's speech.
"The pound has dropped in recent minutes after large downward revisions to economic growth projections, alongside lowering previous forecasts for business investment and productivity, show the clear difficulties that lie ahead for the UK economy," said currency analyst David Cheetham at XTB.
"Sterling has fallen to its lowest level of the day against the US dollar following these announcements and is threatening to break back below the 1.32 handle."
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