Forecasts are inherently uncertain and should be viewed as the centre of a wide range of possible outcomes. In this box, we explored the uncertainty around economic and fiscal forecasts and highlighted how risk analysis, scenarios, and probability distributions can help to assess the likelihood of different outcomes.
An economic and fiscal forecast is an estimation of future possible outcomes for economic and fiscal variables which are subject to numerous drivers and to shocks which can be unknowable until they occur. A central forecast is an estimate of the middle of a range of these possible outcomes where the risks are broadly evenly balanced to the upside and downside. In addition, our forecast is conditioned on announced government policy, which itself can be subject to revision in the future.a Central forecasts should, therefore, always be interpreted as the centre of a range of outcomes, with a low probability of the outcome being very close to the central estimate.
There is as much value in understanding the spread of possible risks and outcomes around the central forecast as there is in understanding the central forecast itself. For policymakers, an understanding of the range of risks around the central forecast is important for setting a resilient policy path and for preparing for the likelihood that policy will need to adjust when outcomes inevitably diverge from the central forecast.
For this reason, the OBR has always placed great emphasis on interpreting central forecasts in the light of the full probability distribution of outcomes. There are a variety of techniques that can be used to do this. This chapter provides an assessment of the most significant current specific risks around the central forecast, including through scenario analysis. It also provides analysis of the sensitivity of the central fiscal forecast to variations in key economic and fiscal variables, such as interest rates, GDP growth, and effective tax rates.
Another approach used is to explore the differences between past outcomes for key economic and fiscal variables, and the forecasts that were made of those outcomes several years before they happened. Historical differences can also be used to assess probabilities for the range of possible future outcomes around the central forecast. We also estimate the probabilities of future outcomes by running simulations based on shocks in history, so the probability distribution around our central forecast is consistent with the historical distribution of shocks affecting the UK economy.b
These techniques can be used to provide a probability assessment of where an outcome lies within a given range around the central forecast. This means it is possible to assess the significance of changes in the central estimates of borrowing from forecast to forecast. Such changes should be seen in the context of the width of the range of possible outcomes around each of those central forecasts. This is important when interpreting the assessment that is made of the likelihood of meeting the Government’s fiscal rules, which we will report on at the next Budget. At the previous Budget in November 2025, in cash terms the degree to which the Government met its main fiscal rule on the central forecast improved by £12 billion compared to the previous assessment in March 2025. As a result, the estimate of the probability of meeting the rule improved from 54 per cent to 59 per cent. This relatively small change in the probability illustrates the very wide range of possible outcomes around the central forecast, and the high likelihood of material changes in the central forecast between fiscal events.
This box was originally published in Economic and fiscal outlook – March 2026