Budget 2013: OBR halves UK economic growth outlook to 0.6% this year

The Office for Budget Responsibility (OBR) has halved its expectations for UK economic growth this year.

The OBR predicts 0.6% growth next year, down from the 1.2% the OBR forecast in his Autumn Statement in December.

Osborne blamed a slowdown in global economic growth, pointing out that economic growth in the US and Japan was flat in Q4, while the eurozone contracted by 0.6%, hitting exports, and he promised to 'go further' with 'monetary, fiscal and supply side reform' to bolster the economy.

Similarly, growth of 1.8% is expected in 2014, down from 2%, 2.3% in 2015 down from 2.7% and 2.8% in 2017, in line with its previous forecast.

David Kern, chief economist at the British Chambers of Commerce, said the short-term forecasts are credible but consistent growth of over 2% a year further down the line is unlikely.

'The new OBR forecast for 2013 of 0.6% is identical to our own,' he said. 'For 2014/15 the OBR’s forecasts are still realistic, only marginally higher than our own. However we believe that the OBR’s forecasts for growth beyond 2015 may be too ambitious, as it is hard to envisage UK growth consistently above 2.5%.'

Osborne also said that government borrowing will rise to £114 billion this year, a big increase from the £99 billion forecast previously and more than  last year's £108 billion figure. He said the government now expects to borrow £108 billion next year.

OBR also said the deficit will fall to 7.4% of GDP this year, down from 7.9% this year and 6.8% in 2013/14, down from 6.9% previously stated.

Benchmark 10 year gilt yields rose 0.08%, while sterling rose by 0.13% against the dollar. The FTSE 100 was modestly up by 0.2% at 6,454.39 at 12:45pm.