Economic and fiscal outlook – November 2020

The latest update of our forecasts was published on the 25 November 2020 in the November 2020 Economic and fiscal outlook. Read the overview or the Executive summary.

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Economic and fiscal outlook - November 2020

November 25, 2020 – 2.04 MB

Chapter 2 sets out our forecasts for the economy over a five year horizon. We cover our assumptions regarding the coronavirus pandemic, set out our latest forecast and results from our upside and downside virus scenarios.

Chapter 3 sets out our forecasts for receipts and public spending over a five year horizon. We also explain our loans and other financial transactions forecasts. All this, together with new policy decisions, builds the outlook for borrowing and debt. We also set out our latest forecast and results from our upside and downside virus scenarios.

In Chapter 4, we assess the Government against its fiscal targets and present the significant uncertainty around our forecast.

Annex A covers the policy decisions since March, Annex B tests the impact of a no deal Brexit on our scenarios and Annex C sets out the major balance sheet interventions during the financial crisis and subsequent recession.

At a glance

Graphic showing GDP growth in 2020
Graphic showing unemployment rate for 2020
Graphic showing borrowing

Supporting documents

Presentations

Boxes

Within each of our key publications we include topical ‘boxes’. These self-contained analyses are unique to this publication and tend to cover recent developments in the economy or public finances that complement the main discussion of our analyses.

The impact of fiscal policy on GDP growth and unemployment

Table A: Fiscal multipliers
The unusual nature and size of the prevailing economic shock, and the Government’s fiscal response, raised the question of whether our usual fiscal multipliers were appropriate at the time. This box set out competing arguments for the multipliers being larger or smaller than those we usually employ and concluded that we would leave them largely unchanged.

International comparisons of the virus and activity

Chart A: International comparisons of virus, public health measures and
The coronavirus pandemic has forced governments around the World to introduce measures to curtail both the health, and economic impacts of the virus. This box aimed to compare the impacts on health and the economy of the virus with those of other selected countries, alongside the stringency of measures introduced by their respective governments.

The rising cost of the coronavirus policy response

Chart 3A
In the November 2020 EFO we estimated that policy measures responding to the coronavirus pandemic would add £280 billion to borrowing in 2020-21, with these policies announced across a number of statements beginning alongside the March Budget. This box considered the main statements contributing to this cost and the nature of the support included in these announcements.

International comparison of change in fiscal positions

Chart 3B
The pandemic has undoubtedly had a negative impact on public finances of countries around the world, but questions remain regarding the impact on the immediate and long-term fiscal positions of the UK relative to other major advanced economies. In this box, we considered the immediate term impact on primary deficits and the extent to which this reflected discretionary policy packages; the size of discretionary policy packages and the use of direct tax and spending policy versus liquidity support; and the impacts in the longer term on structural deficits and debt, including revisions between the IMF’s October 2019 and October 2020 WEO.

The sensitivity of debt interest spending

Chart 3C
Despite debt rising as a share of GDP to a new post-war peak in our November 2020 forecast, government spending on debt interest was expected to fall to a new historic low as a share of total government revenue. This box explored how this had left the public finances more sensitive to future changes in the cost of servicing this higher debt burden.

Trends in the debt stabilising primary deficit

Chart 4A
The debt-stabilising primary deficit depends on the level of debt, nominal growth rates, the effective nominal interest rate, and any 'stock-flow adjustments'. This box discussed the historical evolution of the debt stabilising primary balance, and also explained why it may appear to be ‘easier’ to stabilise debt the higher it rises, and the fiscal risks that such an interpretation entails.