The economy and public finances

The Treasury kept its forecast for growth in 2010 unchanged from the Pre-Budget Report 2009 (PBR) in December at 1.0 -1.5 per cent. However, the forecast for 2011 was reduced slightly from 3.25 – 3.75 per cent to 3 – 3.5 per cent. This moves the Treasury forecast for 2011 closer to that of the Bank of England, but still leaves it well above the average independent forecast for that year of 2.1 per cent.

The Treasury’s medium term economic forecasts remain unchanged at around 3.25 – 3.75 per cent on average for 2012 to 2014.

Public sector net borrowing forecasts were revised downwards relative to the PBR, although the level of borrowing remains high in absolute terms. The previous expectation of £177.6 billion borrowing in 2009/10 (12.6 per cent of GDP) has been reduced to £166.5 billion (11.8 per cent of GDP), while the PBR forecast of a £176 billion deficit in 2010/11 (12 per cent of GDP) has been reduced to £163 billion (11.1 per cent of GDP)