Working paper No.19 The OBR's forecast performance - Graham Atkins

Both external forecasters and the The OBR’s forecast performance 2 The OBR’s forecast performance OBR underpredicted the speed of the subsequent economic recovery and reduction in borrowing in 2021, with the OBR’s forecasts less accurate than externals for real GDP but more accurate for borrowing. [...] We therefore only compare the OBR’s real GDP growth forecasts published in the twice-yearly EFOs to the Bank of England’s real GDP growth forecasts in its quarterly Monetary Policy Reports (formerly Inflation Reports), comparing OBR forecasts to the closest month in which the Bank published a forecast.19 1.29 The overall differences between the OBR and the Bank of England are small. [...] The volatility of the forecasting environment 1.38 A simple way of summarising the volatility of economic and fiscal conditions that the OBR and the Treasury have faced is the standard deviations of the year-on-year changes in real GDP and the level of borrowing in their respective eras (Chart 1.15). [...] The OBR’s forecast performance 26 The OBR’s forecast performance 1.44 Because of the huge and unforecastable hit to output and to borrowing from the pandemic, the OBR’s mean forecast differences are now larger than the Treasury’s at each year horizon. [...] HM Treasury 1.45 Given one of the motivations for the creation of the OBR was to remove the risk of political interference in forecasting, we also evaluate the bias in our economic and fiscal forecasts relative to the Treasury – using the simple average (rather than absolute average) forecast difference.