Office for Budget Responsibility Profile picture
Jul 6, 2021 9 tweets 4 min read Read on X
The global economic downturn brought about by the pandemic has been the worst since the Great Depression of the 1930s. World GDP fell by 3.3% and almost 90% of economies experienced a decline in output in 2020.

#OBRfiscalrisks
The UK experienced one of the deepest recessions among advanced economies, with output falling almost 10% in 2020. This was due to being relatively hard hit by the virus, spending more time under stricter restrictions, and our large share of social consumption in output.
However, the economy also proved to be surprisingly adaptable and resilient as the pandemic unfolded, with each successive lockdown taking less off output.

#OBRfiscalrisks
This economic resilience was thanks in part to a fiscal policy response unprecedented in scale and scope in peacetime. According to IMF, the UK’s rescue package amounted to £354 billion in total and was the third largest among 35 advanced economies after the US & New Zealand.
The UK pandemic rescue package was also relatively skewed toward health expenditure, reflecting the fact that we entered the pandemic with relatively low levels of spare capacity in our health system.

#OBRfiscalrisks
Potential unfunded legacy costs of the pandemic for public services pose a key risk to the fiscal outlook. Considering just selected pressures in three key areas, the Government could face spending pressures of around £10 billion a year on average in the next three years.
What about the lasting impact on the economy?

Evidence on the degree of economic scarring has been mixed and some forecasters have raised their medium-term growth estimates, but most fall within a fairly narrow range. We’ll revisit our assumptions at the Autumn Budget.
Between now and Autumn Budget we’ll continue to monitor the data, including what happens to the 2.6 million people still partially or fully furloughed from their jobs.

#OBRfiscalrisks
Read more in Chapter 2 of the #OBRfiscalrisks report 📗

obr.uk/frr/fiscal-ris…

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More from @OBR_UK

Jul 6, 2021
The Government’s elevated debt stock is both a product of past fiscal risks and a source of future risks to the public finances. Two-thirds of the 80% of GDP increase in debt since 2000 happened in the wake of the 2008 financial crisis and 2020 pandemic.
Despite the stock of debt reaching its highest level since the early 1960s, the cost of servicing that debt remains near historical lows thanks to falling interest rates.

#OBRfiscalrisks
But there are no guarantees that interest rates will remain low, so in Chapter 4, we test the impact of different factors that could push up government borrowing costs.

#OBRfiscalrisks

obr.uk/frr/fiscal-ris…
Read 5 tweets
Jul 6, 2021
What risks does #climatechange pose for government finances? 🌍

OBR Economists Rachel and Tom explain some of the risks we’ve considered in chapter 3 of our 2021 #OBRfiscalrisks report 📗

Read more: obr.uk/frr/fiscal-ris…
The Government has committed to achieving net zero by 2050. Since 1990, the UK has cut its CO2 emissions by 243 million tonnes, more than any other G7 economy and faster than the EU average.

#OBRfiscalrisks
But the UK will need to cut emissions by another 365 million tonnes over the next 30 years to reach net zero emissions by 2050. The reductions will need to come mainly from decarbonising power, industry, buildings, and transport.

#OBRfiscalrisks
Read 10 tweets

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