LONDON, Dec 8 (Reuters) - The structural part of Britain's budget deficit is likely to be lower than was expected in April, a Treasury source told Reuters on Tuesday, meaning borrowing may be able come down quicker when the economy starts growing again.
The source said the Treasury would in Wednesday's pre-budget report cut its estimate of the structural component of the budget deficit for this year as a share of GDP by just under one percentage point.
'Given the economy shrank by more than everyone expected in the first quarter, borrowing to date has been broadly in line with our budget forecast, suggesting more of the deficit of is cyclical,' the source said.
In the April budget, the Treasury forecast net borrowing for this fiscal year would rise to a record 175 billion pounds, or some 12.4 percent of GDP. Treasury sources told Reuters last week that this would only rise by slightly.
But when adjustments were made for the economic cycle, this would marked as 9.8 percent of GDP. Under the new assumptions, this would mean this cyclically-adjusted public sector net borrowing would fall to something just under 9 percent of GDP. Keywords: BRITAIN BUDGET/STRUCTURAL (Reporting by Sumeet Desai; editing by Andrew Hay; Reuters messaging: sumeet.desai.reuters.com@reuters.net; +4420 7542 7708) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
The source said the Treasury would in Wednesday's pre-budget report cut its estimate of the structural component of the budget deficit for this year as a share of GDP by just under one percentage point.
'Given the economy shrank by more than everyone expected in the first quarter, borrowing to date has been broadly in line with our budget forecast, suggesting more of the deficit of is cyclical,' the source said.
In the April budget, the Treasury forecast net borrowing for this fiscal year would rise to a record 175 billion pounds, or some 12.4 percent of GDP. Treasury sources told Reuters last week that this would only rise by slightly.
But when adjustments were made for the economic cycle, this would marked as 9.8 percent of GDP. Under the new assumptions, this would mean this cyclically-adjusted public sector net borrowing would fall to something just under 9 percent of GDP. Keywords: BRITAIN BUDGET/STRUCTURAL (Reporting by Sumeet Desai; editing by Andrew Hay; Reuters messaging: sumeet.desai.reuters.com@reuters.net; +4420 7542 7708) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.