Britain has cut its official forecasts for economic expansion in the next two years. Finance Minister Philip Hammond delivered the first budget statement since voters decided to leave the European Union.
Addressing Parliament on Wednesday, British Finance Minister Philip Hammond said gross domestic product in the UK was expected to grow by 1.4 percent in 2017, down from an estimate of 2.2 percent made in March, before voters decided to leave the EU.
Hammond also reported that the Office for Budget Responsibility – Britain’s independent forecaster – now saw growth in 2018 come in at 1.8 percent, compared with March’s prediction of 2.1 percent.
Britain’s economy has so far largely withstood the shock of the Brexit vote, wrong-footing the Bank of England and the bulk of economists who expected a bigger immediate hit beyond the depreciation of the pound.
But weak public finances will leave Hammond little room to ramp up public spending or go for big tax cuts in the next couple of years.
“Our task is to prepare our economy to be resilient as we exit the EU and match-fit for the transition that will follow,” Hammond told parliament.
He added that the government would maintain its commitment to fiscal discipline, while recognizing the need for investment to drive productivity.
Hammond acknowledged, though, that he would need to borrow billions more pounds over the next five years, with net public sector debt forecast to rise to a peak of 90.2 percent of GDP in 2017/18, up from a projected 81.3 percent in March 2016.