FX Guys

UK: Budget Aims for Growth but Easing of Fiscal Rules Raises Economic Risks

While the debt reduction timeline was shortened from five to three years, this adjustment only affects the next government and may always be revised as appropriate. The Office for Budget Responsibility (OBR) is projecting a comparatively flat debt trajectory over the forecast horizon based on public sector net financial liabilities. But under the former public sector net definition excluding the Bank of England, the OBR anticipates that debt will rise annually, reaching 95.8% of GDP by FY2029-30, driven by the extra GBP 142bn of borrowing.

Scope Ratings (Scope) has projected an increase under a general government debt definition to exceed 110% of GDP by 2027. The easing of the budgetary rules and deferral of correcting long-run fiscal imbalances are economic concerns, as highlighted in Scope’s announcement last month affirming the UK…
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