Doom-mongering watchdog is proved wrong over Brexit

BRITAIN’S official economic forecaster was yesterday forced to admit it had been far too pessimistic about the effects of the Brexit vote.

The Office for Budget Responsibility said it now expects the economy to grow by 2 per cent this year.

That is far faster than the 1.4 per cent it pencilled in at the Autumn Statement in November, when it was accused of making ‘ridiculous’ assumptions about Brexit.

With the economy growing faster than predicted, the OBR slashed its borrowing forecasts for the next five years, giving Philip Hammond a £24 billion windfall.

However the national debt – which is nearly £1.7 trillion, or £62,000 per household – is still set to top £1.9 trillion by the end of the decade.

OBR chairman Robert Chote also warned the Government will fail to balance the books as promised in the next Parliament without further tax rises or spending cuts.

Mr Hammond used his Budget statement to hail ‘an economy that has continued to confound the commentators with robust growth’. He said: ‘Last year, the British economy grew faster than the United States, faster than Japan, faster than France.

‘Indeed, among the major advanced economies Britain’s growth in 2016 was second only to Germany.’

Brexit supporters said upgrades to the economic forecasts showed the OBR was ‘finally catching up with the realities of our prospects following the Brexit vote’.

But the independent watchdog came under fire after warning trade will suffer a decade-long slowdown on the back of the fall of the pound since the Brexit vote.

The OBR said the UK’s recent resilience was underpinned by ‘ stronger- thanexpected’ household spending, which boosted tax receipts. It doubled its forecasts for growth in the current first quarter of 2017, having predicted expansion of just 0.3 per cent in November. Mr Chote said: ‘The economy ended 2016 with greater momentum than we expected in November and we assume that this will carry over into early 2017 with growth of 0.6 per cent in the first quarter.’

The group also cut its borrowing forecasts – with the Government set to borrow £24billion less between now and 2021-22 than expected at the Autumn Statement.

It now expects the deficit to come in at £51.7billion this year – some £16.4billion less than predicted in November.

However it was more gloomy about the economy in the coming years. It downgraded next year’s growth from 1.7 per cent to 1.6 per cent and slashed forecasts for 2019 from 2.1 to 1.7 per cent, rising to 1.9 per cent in 2020 and 2 per cent in 2021.

Last night economics professor Kevin Dowd, a member of the pro-Brexit group Economists for Free Trade, welcomed the OBR’s brighter outlook. ‘We are now seeing these establishment bodies finally catching up with the realities of our economic prospects following the Brexit vote,’ he said.