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Monday, December 6, 2021

Budget 2021: UK economy set to return to pre-Covid level at end of year


The UK’s spending watchdog expects the economy will return to its pre-Covid level at the turn of the year, Chancellor Rishi Sunak has said.

The Office for Budget Responsibility (OBR) has raised its forecast for economic growth in 2021 to 6.5 percent, up from 4 percent previously.

It has also reduced its estimate of Covid-19’s long-term “scarring” effect on the economy from 3% to 2%.

However, the chancellor admitted that the cost of living is rising.

In the short term, he described the economic picture as “strong,” with the OBR now expecting the economy to return to pre-pandemic levels six months earlier than previously predicted.

However, the OBR forecasts that economic growth will be lower next year than previously anticipated, owing in part to a better performance in 2021.

Gross domestic product (GDP), which measures all business, government, and consumer activity in an economy, will rise by 6% in 2022, rather than the 7.3 percent predicted in March, according to the OBR.

Growth is forecast to be 2.1% in 2023, 1.3% in 2024 and 1.6% in 2025.

Mr Sunak explained that the increase in inflation, which measures how quickly the cost of living rises over time, was caused by increased demand for energy as economies and factories reopened following coronavirus lockdowns.

According to the chancellor, the inflation rate was 3.1 percent in September and “is likely to rise further.” The OBR anticipates that the CPI measure of inflation will average 4% over the next year.

“The supply chain and energy price pressures will take months to ease,” Mr Sunak predicted.

“Anyone who claims that we can solve this problem overnight is being irresponsible.”

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