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UK's economy to recover more swiftly than previously expected, according to OBR
3 March 2021, 13:37 | Updated: 3 March 2021, 14:51
The UK’s economy will return to pre-Covid levels six months earlier than previously predicted, according to the latest forecasts from the Office for Budget Responsibility.
However in five years’ time, because of the impact of the pandemic, the economy is expected to be 3% smaller than it would have been, Chancellor Rishi Sunak revealed on Wednesday.
Mr Sunak announced the news as he set out out how the country will recover from the coronavirus pandemic in the Spring Budget.
He insisted forecasts from the OBR show the UK's economic response to Covid-19 is "working".
Mr Sunak told the House of Commons: "The Office for Budget Responsibility is now forecasting, in their words 'a swifter and more sustained recovery' than they expected in November.
"The OBR now expects the economy to return to its pre-Covid level by the middle of next year - six months earlier than they previously thought. That means growth is faster, unemployment lower, wages higher, investment higher, household incomes higher."
The Office for Budget Responsibility is a watchdog set up by the Government which provides independent analysis of the economy.
Mr Sunak added Covid-19 has done "profound damage" to the economy and the forecasts make clear that "repairing the long-term damage will take time".
"The OBR still expects that in five years' time, because of coronavirus, our economy will be 3% smaller than it would have been," he said.
He added: "The OBR forecast that our economy will grow this year by 4%, by 7.3% in 2022, then 1.7%, 1.6% and 1.7% in the last three years of the forecast."
The Chancellor said a July 2020 forecast suggested unemployment could peak at 11.9%, telling MPs: "Today, because of our interventions, they forecast a much lower peak: 6.5%.
"That means 1.8 million fewer people are expected to be out of work than previously thought. But every job lost is a tragedy, which is why protecting, creating and supporting jobs remains my highest priority."