UK Budget Deficit Lowest in 10 YTD but Packs a Surprise for 2017

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Britain’s public borrowing declined more than expected in May, although the budget deficit is still assumed to increase over the rest of the year as the economy weakens.

Chancellor Philip Hammond seemed to be enlivened with this information: Public sector net borrowing excluding public sector banks decreased by £ 0.3 billion from the previous year to £ 6.7 billion. This was the lowest borrowing for May since 2007.

On the year 2016, the slight augmentation was managed by a 4.3% increase in VAT receipts per the Office for National Statistics.

Forecasts from economists say the deficit will further decrease to £6.8 billion, contrary to the previous prediction from April – £9.39 billion.

The budget deficit for the financial year ending March 2017 resulted to £ 46.6 billion, contrary to the initial assessment of £ 48.7 billion – lowest since March 2008. Also, the Office for Budget Responsibility had estimated a deficit of £ 51.7 billion for March.

Central government net cash requirement decreased by £ 14.3 billion to a surplus of £ 6.9 billion in 2017 financial year-to-date, the data from ONS.

Numbers from May implies that public finances started magnificently, but in spite of this, economist Scott Bowman of Capital Economics says there’s no assurance that the trend will follow through and “fiscal policy is still set to provide a notable hindrance on GDP growth in the coming years,” he added.

Public sector net debt, not counting in public sector banks, was £ 1,737.3 billion at the end of May, way up high at 86.5% of GDP.

Chancellor Philip Hammond said on Tuesday that the Conservatives would be persistent in balancing the budget by the middle of the next decade.

The Agents’ summary of business conditions, published by the Bank of England, showed that moderate underlying growth in activity continued overall.

Meanwhile, heightened unpredictability continues to drag business investments. More on this, the report pointed that the direct impact of the fall in sterling on cost inflation had quieted down, but increased costs continued to move through supply chains into retail prices.