He observed that the budget deficit still remains one of the highest in the G7, at 7 per cent of GDP.
Peter Dixon of Commerzbank agrees that Mr Osborne is unlikely to announce significant measures: “The Autumn Statement represents increasingly a health check for where we are with regards to public finances rather than an occasion for major policy announcements.”
Mr Dixon expected the OBR to raise its growth forecast for 2014 from 1.8 per cent to roughly 2.5 per cent, which he considered “probably within the bounds of possibility”. “We are getting back to a growth profile that the OBR has long been calling for.
“A sentiment hurdle seems to have been overcome. The headwinds of the eurozone crisis are increasingly disappearing into the rear view mirror.”
Mr Kernohan observed that the shift in sentiment in the UK this year has been the biggest among developed countries, with consensus growth forecasts for the UK having improved more noticeably than for any other major economy.
Mr Dixon said he would be interested to see if Mr Osborne announces any measures that will help the supply side of the housing market. The buy-to-let scheme is widely expected to lead to stronger demand in the housing market, but lack of supply is a major constraint.
Otherwise, Mr Dixon does not expect much action from Mr Osborne. “The reality is, given the kind of rebalancing recovery the UK is going through, the government can’t afford too many giveaways”.
