2009 Budget: Darling downgrades economic forecasts

Chancellor Alistair Darling has downgraded his economic growth forecasts for 2009/10 due to the ‘unexpected severity of the recession’.

Delivering his eagerly-awaited Budget statement earlier today, the Chancellor confirmed that the UK economy has contracted by –1.6% in the last quarter of 2008 and would do so by a similar amount in the first quarter of this year.

Darling told a lively House of Commons that GDP growth for the year as a whole would shrink to –3.5%.

However, the Chancellor went on to stress that he was ‘confident’ the UK economy would recover, predicting growth of 1.25% in 2010 and 3.5% annually from 2011.

But Howard Archer, chief UK economist at IHS Global Insight, warned: ‘We suspect 3.5% is far too optimistic for growth in 2011, especially given the very substantial fiscal tightening that will be required.’

Darling also revealed that Government borrowing would reach more than 12% of GDP, or £175bn, in the next financial year. Total Government debt is expected to rise from 59% of GDP to 79% by 2013/14.

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