Economic growth forecasts for this year were cut to 4%, reflecting the impact of the latest national Covid-19 lockdown as Finance Minister Rishi Sunak unveiled his budgetary plan for the UK’s recovery from the pandemic.
Citing forecasts from the Office for Budgetary Responsibility, Sunak said the economy would grow by 7.3% in 2022, then 1.7%, 1.6% and 1.7% in the following years. The economy contracted by 10% last year, it’s worst performance in 300 years.
The current year forecast compares with an estimate of 5.5% growth made last November before the government was forced to introduce a third national lockdown having loosened restrictions before Christmas, leading to a surge in new cases and outbreak of a UK variant of the virus.
The 2022 growth outlook was raised from November’s forecast of 6.6%, while 2023 was downgraded from 2.3%, 2024, lowered from 1.7% and 2025 down from 1.8%.
“The OBR now expects a return to pre-Covid levels by the middle of next year, six months earlier than first thought,” Sunak said as he delivered his Budget speech to parliament. He added that the OBR expected a “swifter and more sustained recovery” than they were expecting in November.
However, by 20205, the OBR still expected the economy to be 3% smaller than it would have been, Sunak warned.
Borrowing as a percentage of GDP will be 10.3% of GDP, Sunak said, falling to 4.5% in 2023, then 3.5%, 2.9% and 2.8% in subsequent years. Borrowing in the current year would hit a record £335bn.
Debt would peak at 97.1% of GDP by 2023/24, Sunak said.
Sunak has spent £280bn to protect jobs and businesses from the ravages of the pandemic and stop the downturn turning into a lasting economic meltdown. As a result the UK’s national debt is £2.1trn and debt as a percentage of output, at 97.9%, is the highest since the early 1960s.