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Autumn Budget 2017: Revised GDP forecasts leaves Chancellors war chest running low

AB17: Chancellors war chest running low

Yael Selfin, Chief Economist at KPMG UK, comments on the Chancellor’s Autumn Budget 2017 speech.

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Yael Selfin, Chief Economist at KPMG UK, commented on the Chancellor’s Autumn Budget:

“The Chancellor was handed a tough challenge in his Autumn Budget by the OBR in the form of a significant downgrade to UK economic growth forecasts. While the forecasts may seem somewhat pessimistic, Brexit-related challenges could see further deterioration in outlook in the short to medium term. Additionally further falls in net inward migration, beyond the ONS’s latest projections, would also reduce future long term economic growth.

“This contrasts with a pick-up in growth prospects elsewhere, with expectations for growth in Eurozone rising to 2.2% in 2017 and to 1.9% in 2018. While in the US they are up to 2.2% in 2017 and 2.5% next year, compared with revised 1.5% and 1.4% growth forecasts in the UK followed by a slight further deterioration for two years as the UK leaves the EU.

“The downgrade to UK GDP growth forecasts has totally overshadowed the generally good news on public finances so far this fiscal year, reducing the money available to the Chancellor. However, the Chancellor is sticking to his target of reducing public borrowing to less than 2% of national income by 2020-21, albeit with a reduced chest for any emergency spending in the event the economy requires an additional boost.

“The nearly £18bn in extra spending announced up to 2022-23 had a few big winners, including housing and measures to improve productivity, such as additional money for the National Productivity Investment Fund and for Research and Development. No doubt more will need to be spent in areas such as improving basic skills and infrastructure in future Budgets if the UK is to see a significant rise in productivity performance. With stronger productivity the UK’s main route to raise future economic growth and prosperity, it is a prize worth aiming for.”

 

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