Finance News

OBR forecasts 'lasting' economic damage from Covid-19: Spending Review

Rozi Jones
|
25th November 2020
Houses house of parliament commons government govt gov

The OBR's latest economic forecast shows that the UK economy will contract by 11.3% in 2020.

Outlined in the government's Spending Review, Chancellor Rishi Sunak said the fall was the largest for more than 300 years.

The OBR predicts that the economy will recover by 5.5% in 2021, 6.6% in 2022, then 2.3%, 1.7% and 1.8% in the following years.

It says output won't return to pre-crisis levels until Q4 2022, describing the economic damage as "lasting", with "long-term scarring".

By 2025, the economy is predicted to remain 3% smaller than expected.

Sunak outlined a "significant but necessary increase in borrowing and debt", with the UK forecast to borrow a total of £394bn this year, equivalent to 19% of GDP - the largest in peacetime history.

Sunak said borrowing is expected to fall to £164bn next year but will remain at £100bn or more until the end of Parliament.

He added that underlying debt is forecast to rise in every year, rising from 91.9% of GDP this year, reaching 97.5% of GDP in 2025-26.

However, he stressed that the "cost of inaction would have been far higher”.

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