Figures in the Treasury’s pre-Budget report documents reveal that in 2014/15, the national debt will be £1,473 billion. That is 77.7 per cent of gross domestic product
What am I missing?
Nominal GDP is about £1.4 trillion isn\’t it? So that debt is more like 100% or so of GDP….unless we\’re expecting a great deal of growth or inflation between now and then?
You can get there with 6% annual growth in nominal GDP, which is high but not utterly insane.
It is utterly insane well on the way , I don`t get it either ?
It grew 6% a year in the 10 years to 2007. Nominal figures don’t adjust for inflation, so you can get there with, roughly, 3% inflation and 3% real growth.
If 2009 GDP is 1.4 trillion, for a 1.4 trillion debt to equal 77.7% of GDP in 2014, the GDP in that year will have to be 1.9 trillion.
For GDP to grow from 1.4 to 1.9 over that timeframe requires an annual increase of 5.2%.
Whether this is realistic or not I leave for another debate.
You could get there with inflation of 12% and a 6% fall in real GDP growth, too, which seems to me rather more likely.