Overview Of The March 2022 Economic And Fiscal Outlook By the OBR

24th March 2022

The Office for Budget Responsibility (OBR) casts its beady eye over the Spring Statement by the Chancellor Rishi Sunak.

Two years since the start of the pandemic, this Economic and fiscal outlook (EFO) is presented against the backdrop of another unfolding global shock. The Russian invasion of Ukraine is foremost a human tragedy and a reminder of the terrible costs of wars and the immense and immeasurable losses for those caught up in them. The conflict also has major repercussions for the global economy, whose recovery from the worst of the pandemic was already being buffeted by Omicron, supply bottlenecks, and rising inflation. A fortnight into the invasion, gas and oil prices peaked over 200 and 50 per cent above their end-2021 levels respectively. Prices have since fallen back but remain well above historical averages.

As a net energy importer with a high degree of dependence on gas and oil to meet its energy needs, higher global energy prices will weigh heavily on a UK economy that has only just recovered its pre-pandemic level. Petrol prices are already up a fifth since our October forecast and household energy bills are set to jump by 54 per cent in April. If wholesale energy prices remain as high as markets expect, energy bills are set to rise around another 40 per cent in October, pushing inflation to a 40-year high of 8.7 per cent in the fourth quarter of 2022 (Chart 1). Higher inflation will erode real incomes and consumption, cutting GDP growth this year from 6.0 per cent in our October forecast to 3.8 per cent. With inflation outpacing growth in nominal earnings and net taxes due to rise in April, real livings standards are set to fall by 2.2 per cent in 2022-23 - their largest financial year fall on record - and not recover their pre-pandemic level until 2024-25.

For a huge amount more detail and information go HERE