Treasury defends Budget forecasts

Treasury officials have defended the economic forecasts set out in the Budget, following claims that the projections may be ‘too optimistic’.

Last week Alistair Darling told MPs that GDP growth for the year as a whole would shrink to –3.5% but stressed he was ‘confident’ that the economy would recover rapidly. The Chancellor predicted that UK growth would reach 1.25% next year and 3.5% in 2011.

However several leading watchdogs, including the International Monetary Fund (IMF), claim the downturn will continue into 2010, with the IMF expecting output to fall by 0.4%.

The row has prompted the Treasury’s chief macroeconomist, Dave Ramsden, to defend Darling’s Budget forecasts. Ramsden said the Government had set out a ‘transparent and realistic set of forecasts and a credible consolidation plan into the medium term.’

‘Where we are more optimistic than the IMF is that we think world leaders will deliver on their commitments, which will lead to a pick-up in world growth,’ he continued. ‘I would absolutely stand by the judgment that we have made in our forecasts.’