UK lowered forecast for economy growth in 2017

UK lowered forecast for economy growth in 2017 and the government will have to take more loans over the next five years.

In autumn statement the UK Finance Minister Philip Hammond said that according to the Office for Budget Responsibility (OBR) the gross domestic product (GDP) will expand 1.4% in 2017, below the estimate of growth of 2.2% made in May. The loans will also increase by another 122 billion GBP (151 billion USD) to the financial 2020-21, which means that the net debt to GDP ratio will reach 90.2%.

“The vote of UK residents to leave the EU in June, was a decision which will change the direction of British history< said UK Finance Minister, Philip Hammond. "However, the decision makes it more urgent than ever the need to tackle long-term weaknesses in our economy, including the difference in labor productivity, housing and destructive imbalance of economic growth and prosperity. Our task now is to prepare our economy to be sustainable until we leave the EU and is well prepared for the transition that will follow", added he. The UK Finance Ministry tries to help families with low and middle incomes and to outline the direction of fiscal discipline amid increased uncertainty. Government deficit is expected to reach 68.2 billion GBP in 2016-17, compared to the previous forecast by Finance Minister George Osborne 55.5 billion GBP. The deteriorating economic prospects leave Hammond only a little space for major fiscal changes. He promised to focus on the needs of ordinary working class families, while trying to solve the concerns of those who feel left behind by globalization. The economy has proved unexpectedly stable in the referendum in June, Office for Budget Responsibility revised up growth for 2016 to 2.1% from 2.0%. However, the data shows some problems and negative trends. The employment growth is slowing, while household incomes are starting to feel pressure from the falling pound. The government is not trying to achieve a surplus by 2020, but pledged to strike a balance at the beginning of the next parliament. It is expected that economic growth in 2019 and 2020 to be 2.1% per year, unchanged from expectations in March, according to the forecasts of Office for Budget Responsibility. Hammand also announced the creation of a National Productivity Investment Fund, which aims to strengthen the slowing performance of the UK, providing 23 billion GBP innovation and infrastructure over the next five years. The measures announced by the Treasury before the speech of Hammond include 1.4 billion GBP for the construction of 40,000 new housing and easing of rules governing affordable housing funds. The minimum wage will be increased to 7.50 GBP per hour from the current 7.20 GBP.

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