Office for Budget Responsibility economic forecasts included in today’s Budget statement put this year’s growth at 1.5%, down from the 2% predicted in the spring Budget.
Growth is then expected to fall to 1.4% next year, 1.3% in each of the two following years before rising to 1.5% in 2021 and 1.6% in 2022.
Stubbornly sluggish productivity was pinpointed at the reason behind this weak growth outlook.
“Regrettably our productivity performance continues to disappoint,” chancellor Philip Hammond told MPs.
“The OBR has assumed at each of the last 16 fiscal events that productivity growth would return to its pre-crisis trend of about 2% a year, but it has remained stubbornly flat.”
Paul Johnson, director of the Institute for Fiscal Studies, tweeted that the OBR forecasts represented a “huge change”.
OBR has handed the chancellor a big downgrade to growth forecasts. Heading to 1.5% a year growth in early 2020s not the 2% forecast back in March. Huge change
— Paul Johnson (@PJTheEconomist) November 22, 2017
However, the OBR did confirm that the government remained on track to meet its fiscal rules, with the deficit expected to dip below 2% next year.
Debt is also expected to peak at 86.5% of GDP this year, before starting to fall, dropping to 79.1% in 2022-23.
Borrowing expectations were also down and borrowing is expected to fall in every year of the forecast from £39.5bn next year to £25.6bn in 2022-23.
This would be its lowest level in 20 years, Hammond said.
