Economic growth forecasts for 2024 and 2025 downgraded

The Office for Budget Responsibility (OBR) has unveiled a sharp downgrade in its forecast for the UK’s economic growth in 2024 and 2025.

As revealed in the Chancellor’s Autumn Statement today, 2024’s forecast growth has dropped from 1.8% to 0.7% while 2025 has gone from 2.5% to 1.4%.

Jeremy Hunt said the Government had “taken decisions for the long-term” and as a result the UK economy is set to grow by 0.6% in the current year, according to the forecasts from the OBR. It is a better than expected picture for this year, which was anticipated to see a small contraction.

And looking further ahead, Hunt said GDP is expected to rise by 1.9% in 2026, and 2% in 2027.

The OBR forecasts unemployment will rise to 4.6% in the middle of 2025, as slower GDP growth and higher interest rates weigh on labour demand.

Unemployment is then expected to fall back to 4.1% at the end of the forecast horizon.

Meanwhile, headline debt is now predicted to be 94% of GDP by the end of the five-year forecast period.

The OBR forecasts underlying debt will be 91.6% of GDP next year, 92.7% in 2024-25, 93.2% in 2026-27, before declining in the final two years of the forecast to 92.8% in 2028-29.

This means the Government will meet its fiscal target of having the debt falling in five years’ time.

Highlighting long awaited falling inflation, Hunt noted that the OBR says headline inflation will fall to 2.8% by the end of 2024, before falling to the 2% target in 2025.

The Autumn Statement acknowledges that inflation has been more persistent than expected, pointing out that this is a global problem.

The latest UK figure for consumer price inflation is 4.6% for October – which is down from a peak of over 11%.