UK's 2026 economic growth forecast downgraded to 1.1%

K-LinePoet · 2026-03-24T20:15:03+00:00

The UK Office for Budget Responsibility has lowered its economic growth forecast for 2026 to 1.1%, and predicts growth of 1.6% and 1.5% for 2027 and 2028 respectively. Changes in the Middle East situation may impact energy prices and government borrowing costs, leading to rising government bond yields. Investors have adjusted down their expectations for interest rate cuts from the Bank of England.

K-LinePoet

2026-03-24 20:15:03

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The UK Office for Budget Responsibility issued a statement on the 3rd, lowering the UK’s economic growth forecast for 2026 from the previous estimate of 1.4% to 1.1%. The Office expects the UK GDP to grow by 1.1% in 2026, with growth rates of 1.6% in 2027 and 2028, followed by 1.5% in the next two years. However, this forecast does not yet account for the potential impact of recent Middle East developments on energy prices and government borrowing costs.

Due to escalating tensions in the Middle East, international energy prices have risen, heightening inflation concerns and affecting investors’ expectations of the Bank of England’s monetary policy direction. On the 3rd, the yield on 10-year UK government bonds increased by about 0.14 percentage points to around 4.5%, leading to higher government financing costs. Derivatives market pricing indicates that investors expect only one 25 basis point interest rate cut by the Bank of England before December this year, whereas last week, the market generally anticipated two rate cuts within the year. (Xinhua)

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