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A response from Rob Jump and me to the latest OBR forecasts and the associated commentary.
Sunak's statement that ‘economic emergency has only just begun’ set the tone for press coverage of the release. 1/ http://macroflow.org/commentary/spending-review-2020/
Sunak's statement that ‘economic emergency has only just begun’ set the tone for press coverage of the release. 1/ http://macroflow.org/commentary/spending-review-2020/
Following publication of the OBR’s April ‘coronavirus reference scenario’ we published forecasts with @IPPR.
We forecast lower growth and higher deficits than the OBR, but argued that the resulting elevated debt levels are unlikely to cause problems. 2/ https://www.ippr.org/research/publications/inside-the-black-box
We forecast lower growth and higher deficits than the OBR, but argued that the resulting elevated debt levels are unlikely to cause problems. 2/ https://www.ippr.org/research/publications/inside-the-black-box
While the OBR now forecasts a lower immediate hit to nominal GDP than in their April scenario, a much weaker recovery than previously forecast means that the OBR's downside forecast for 2021–22 almost coincides with our May median projection 3/
The OBR’s latest deficit forecasts are now much closer to the forecasts we published in May, although the OBR remains more optimistic than us on the prospects for medium-run growth, so that our medium-term projections are substantially higher than the OBR’s. 4/
In May, we argued that public debt at the levels implied by the macroflow forecasts did not pose a problem. Our public debt forecast remains less optimistic than the OBR’s – even after their November revisions – and we have seen nothing to change our opinion. 5/
Jason Furman has recently made a similar argument for the USA: Based on a long-run target interest-to-GDP ratio of around 1%, he argues that a reasonable sustainable debt level would be in the region of 150% of GDP. 6/ https://twitter.com/jasonfurman/status/1329817571332337684
As has been widely noted, claims by BBC journalist Laura Kuenssberg that this ‘this is the credit card, the national mortgage, everything absolutely maxxed out.’ are inaccurate and irresponsible. 7/ https://www.ippr.org/blog/economists-urge-bbc-rethink-inappropriate-reporting-uk-economy
