The key chart
The key message
Seen from the perspective of financial sector balances, the latest OBR forecasts for the UK economy and public finances tell us three things.
- First, the UK government’s response to the COVID-19 pandemic was timely, necessary and appropriate.
- Second, the financial relationship between UK households, corporates, government and the rest-of-the-world will remain broadly unchanged during 2021.
- Third, (obvious and familiar) risks to the medium-term forecast remain to the downside and imply persistent and significant fiscal and current account deficits (little has changed since November 2020).
Somewhat surprisingly, given the significant event risk that the Covid-19 pandemic represents, the medium-term outcomes forecast in March 2020, November 2020 and March 2021 are broadly similar – a return to an economy characterised by large and persistent sector imbalances, with combined public and private sector deficits and an increasing reliance on the RoW as a net lender.
This scenario is as unsustainable post-COVID as it was pre-COVID, and leaves the reader wondering about the value of official forecasts in presenting an accurate outlook for the future financial interactions between the key UK economic agents.
Please note that the summary comments and chart above are extracts from more detailed analysis that is available seperately. Please also note that subsequent posts will dig out the “hidden value”!