Forecast evaluation report Robert Chote Chairman

Transcription

1 Forecast evaluation report 2017 Robert Chote Chairman

2 Background to the FER The FER is an annual report looking at the performance of past EFO forecasts against the latest outturn data Rationale Accountability and transparency Lessons for future forecasts We focus this year on economic and fiscal forecasts from 2015: our last forecast under the Coalition 2016: our last forecast before the EU referendum Also an update on our review of fiscal modelling

3 Outline of remarks The public finances Public sector net borrowing forecasts since 2010 Public sector net borrowing in Public sector net borrowing this year The economy Forecasts for GDP Productivity and the labour market Our Brexit judgements: an update

4 Public sector net borrowing (PSNB) Per cent of GDP Latest data forecast

5 Reasons for forecast differences Statistical changes Changes in Government policy Unexpected economic developments Unexpected fiscal developments

6 PSNB forecast revisions Per cent of GDP Previous forecasts 2017 forecast Latest data

7 PSNB forecast revisions Per cent of GDP Previous forecasts 2017 forecast Latest data

8 billion PSNB 2-year forecast differences Higher borrowing/higher spending/lower receipts Jun 10 Nov 10 Spending Receipts Net borrowing Lower borrowing/lower spending/higher receipts Mar 11 Nov 11 Mar 12 Dec 12 Mar 13 Dec 13 Mar 14 Dec 14 Mar 15 Jul 15

9 OBR forecasts vs previous 20 years: PSNB Public sector net borrowing (per cent of outturn GDP) In-year One Two Three Four Five June November November December December December July November November

10 OBR forecasts vs previous 20 years: spending Spending (per cent of outturn GDP) In-year One Two Three Four Five June November November December December December July November November

11 OBR forecasts vs previous 20 years: receipts Receipts (per cent of forecast GDP) In-year One Two Three Four Five June November November December December December July November November

12 PSNB forecasts: uncertainty PSNB (Per cent of GDP) (adjusted) Latest data

13 PSNB forecasts: uncertainty PSNB (Per cent of GDP) (adjusted) Latest data

14 billion PSNB in forecast November 2016 forecast Forecast Outturn: February to 2017 Outturn: October 2016 to January 2017 Outturn: April to September forecast First estimate of Latest estimate of

15 billion PSNB in forecast November 2016 forecast Forecast Outturn: February to 2017 Outturn: October 2016 to January 2017 Outturn: April to September forecast First estimate of Latest estimate of

16 billion PSNB in forecast November 2016 forecast Forecast Outturn: February to 2017 Outturn: October 2016 to January 2017 Outturn: April to September forecast First estimate of Latest estimate of

17 billion PSNB in forecast November 2016 forecast Forecast Outturn: February to 2017 Outturn: October 2016 to January 2017 Outturn: April to September forecast First estimate of Latest estimate of

18 billion PSNB in forecast November 2016 forecast Forecast Outturn: February to 2017 Outturn: October 2016 to January 2017 Outturn: April to September forecast First estimate of Latest estimate of

19 billion PSNB in forecast November 2016 forecast Forecast Outturn: February to 2017 Outturn: October 2016 to January 2017 Outturn: April to September forecast First estimate of Latest estimate of

20 PSNB in : vs today Net borrowing ( billion) 2017 versus latest data 2017 forecast 52.0 Latest outturn 45.0 Difference -7.0 of which: Classification and methodological changes -1.3 Higher income tax and NICs -3.5 Higher VAT receipts -0.9 Higher corporation tax receipts -0.8 Higher other central government receipts -0.9 Lower central government spending -1.9 Higher local authority net borrowing 1.8 Higher public corporation net borrowing 0.5

21 PSNB to date in vs (percentage change on a year earlier) 2017 forecast against latest data April to August Central government receipts* of which: PAYE income tax and NICs VAT Self-assessment income tax Central government spending* of which: Debt interest EU transfers Central government net investment* Local authority net borrowing* Public corporation net borrowing* *Excludes APF transfers and central government grants to local authorities where relevant

22 OBR forecast vs previous 20 years: real GDP Real GDP growth In-year One Two Three Four Five June November November December December December July November November

23 Real GDP 1-year forecast differences 4 3 Percentage points June 2010 Average hours Employment Output per hour GDP

24 Real GDP 1-year forecast differences 4 3 Percentage points June 2010 Average hours Employment Output per hour GDP

25 Real GDP 1-year forecast differences 4 3 Percentage points June 2010 Average hours Employment Output per hour GDP

26 Productivity: output per hour Output per hour (2009Q1 = 100) Successive forecasts June Outturn

27 The productivity puzzle: explanations Labour hoarding Inefficient reallocation of capital Very loose monetary policy Loose labour markets Weak business investment

28 Business investment Per cent s 1990s Years from peak

29 US productivity disappointments Dollars per hour (2009 prices) August 2014 January 2015 August 2015 January 2016 August 2016 January 2017 June

30 G7 productivity disappointments November 2014 OECD forecast Outturn Per cent Canada France Germany Italy Japan United Kingdom United States

31 G7 productivity disappointments November 2014 OECD forecast Outturn Per cent Canada France Germany Italy Japan United Kingdom United States

32 Productivity growth: forecast Output per hour Average 2017 forecast FSR 2017 projection 5 Per cent

33 Unemployment rate 9 Per cent June Latest

34 Average hours worked Hours per week June Latest

35 Our Brexit judgements Weaker pound squeezes consumers Uncertainty deters business investment Weaker pound boosts net exports Transition to less trade-intensive economy Net inward migration to fall

36 Business investment 130 November 2016 Latest Q1 = Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2

37 Our Brexit judgements Weaker pound squeezes consumers Uncertainty deters business investment Weaker pound boosts net exports Transition to less trade-intensive economy Net inward migration to fall

38 Net migration Thousands (year-to-date) Latest 2017 forecast

39 Our Brexit judgements Weaker pound squeezes consumers Uncertainty deters business investment Weaker pound boosts net exports Transition to less trade-intensive economy Net inward migration to fall

40 Conclusion Budget six weeks away Lots of uncertainty in the forecast, but some pointers Bad for public finances Weaker outlook for productivity Good for public finances Lower sustainable unemployment rate More hours worked Downward revisions to last year s deficit Productivity likely to dominate