8th July 2015
The independent Office for Budget Responsibility has revised down economic growth forecasts to coincide with today’s Budget statement by the Chancellor.
GDP growth is projected at 2.4% (revised down from 2.5%) in 2015, 2.3% (unchanged) in 2016 and 2.4% (revised up from 2.3%) in 2017. Growth is seen holding at 2.4% during 2018-2020.
Howard Archer, chief UK and European economist at IHS Global Insight, said the new forecasts “look eminently plausible”, although he said the likelihood of growth staying at 2.4% between 2018 and 2020 “could prove questionable”.
In his Budget speech to Parliament today, George Osborne praised the independent work of the OBR and said: “We now have Budgets that fit the economic forecasts, instead of economic forecasts that were fixed to fit the Budget.”
However, he pointed to the crisis in Greece and slowdown in the US and China as ” all the more reason to get our own house in order”.
Archer added: “Caution is certainly justified in the near-term growth forecasts due to the risks to UK economic activity coming from the Greek situation.
“While the UK has little direct exposure to Greece, we have heavy exposure to the Eurozone, particularly through exports of goods and services.
“The hope is that if Grexit occurs, the contagion in the Eurozone will be limited due to the firewalls that have been put in place and the ECB’s likely actions, but the fact is that nobody can really know what will happen if Grexit occurs (such as the impact on business and consumer confidence as well as financial market pressures).
“Clearly, the more that Eurozone economies are adversely affected by events surrounding Greece, the more UK growth would be liable to take some hit.”