Proactive Investors - Britain’s growth projections could be overly optimistic for the year ahead as the likes of supply shocks are left unaccounted for, analysts have said.
Though the Office for Budget Responsibility forecast UK gross domestic product (GDP) to climb by 0.8% for the year, Citi analysts said on Tuesday that a more realistic figure would be around 5%.
Indeed, Citi noted the 8% forecast would see UK GDP grow far quicker than has seen so far since the pandemic.
“We think post-Covid fiscal headwinds are only just beginning,” the bank said in a note, as it warned further “supply shocks” were likely in the future.
According to the bank, the OBR’s fiscal spending forecast is short by about £30 billion to £35 billion, while cuts unveiled in Wednesday’s budget are also likely “undeliverable”.
The government will have to spend in the region of £20 billion to £25 billion extra than is planned therefore, the bank said, taking the UK’s so-called fiscal black hole to between £50 billion and £60 billion.