The OBR also said the rise in inflation in the wake of the 2022 invasion “was larger and more persistent than we had expected”, in a move that will affect Ms Reeves’s ability to balance the books.
An evaluation of previous forecasts showed double-digit inflation led to much higher welfare spending and debt interest costs. Higher inflation will also pile pressure on the Government to top up Whitehall budgets, which are set in cash terms.
The watchdog admitted that it had underestimated government borrowing by £60bn in recent forecasts.
The OBR added that higher energy prices may have acted as a bigger drag on productivity growth. Another downgrade of productivity would have a major effect on the Chancellor’s £23.6bn fiscal headroom.
The OBR’s rough rule of thumb suggests every 0.1 percentage point downgrade in productivity adds £8bn a year to borrowing.
The watchdog said it would update its economic models to take these factors into account before its next Budget forecast this autumn.
Separately on Tuesday, Megan Greene, an external member of the Bank of England’s Monetary Policy Committee, warned that interest rates may need to rise.
Speaking in Derby, Ms Greene said: “I think the case for hiking rates grows as the conflict wears on, and believe a tightening in monetary policy over the next few weeks or months may be necessary.”
A Treasury spokesman said: “We have the right economic plan with our actions reducing government borrowing by over £20bn last year. The economy is in a stronger position to deal with shocks as a result of the Chancellor’s decisions.”