Budget 2021: the UK economy will return to pre-Covid levels at the end of the year

The UK’s spending watchdog expects the economy to return to pre-Covid levels earlier this year, Chancellor Rishi Sunak said.

The Office of Budgetary Responsibility (OBR) raised its forecast for economic growth in 2021 to 6.5%, compared to the previous forecast of 4%.

It also reduced its estimate of the long-term “scar” effect of Covid-19 on the economy from 3% to 2%.

But the chancellor acknowledged that the cost of living is rising.

Mr. Sunak said rising inflation, which measures how quickly the cost of living rises over time, is due to rising energy demand and supply chain problems as economies and factories reopen. following the coronavirus blockade.

He said inflation in September was 3.1% “and is likely to increase further”. The OBR expects the CPI inflation measure to reach an average of 4% over the next year.

“It will take months to ease the pressures caused by supply chains and energy prices,” the Chancellor said.

“It would be irresponsible for anyone to pretend they can solve this problem overnight.”