— Adds Detail On Labour Mkt To Version Transmitted At 1241GMT
— 2011 GDP Forecast 1.7% vs 2.1% Seen In November
— 2012 GDP Forecast 2.5% vs 2.6% Seen In November
— 2013 GDP Forecast 2.9% unrevised from November
— 2014 GDP Forecast 2.9% vs 2.8% Seen In November

LONDON (MNI) – The UK’s Office for Budget Responsibility has
downgraded its official growth forecast for 2011 to 1.7%, from the 2.1%
forecast in November 2010, Chancellor of the Exchequer George Osborne
revealed as part of his Budget speech.

The Chancellor said that the downgrade was due to a
weaker-than-expected Q4 2010 GDP outturn, high commodity prices and high
inflation.

With growth lower, the OBR raised its forecast for unemployment
with an extra 70,000 people expected to join the claimant count list as
a result as a result of reduced output.

The forecast showed unemployment continuing to be higher than
previously expected with the claimant count forecast to peak at 1.56
million this year, before falling to 1.5 million in 2012 – 90,000 above
the OBR’s November forecast.

Employment is expected to remain at 29 million this year with
100,000 less people in work than the OBR forecast in November.

Employment will then increase each year, hitting 30 million in 2015
– 100,000 lower than predicted in November, the OBR’s forecasts show.

“Although average quarterly growth this year is set to be higher
than was previously forecast, the annual forecast for 2011 has been
revised to 1.7%. This the OBR attributes specifically to the weaker than
expected final quarter of last year, the rise in world commodity prices
and the higher-than-expected inflation in the UK,” Osborne said.

“However, the OBR point out that the effect, in their words,
“creates scope for slightly stronger growth in later years” than
previously forecast. So while they expect real GDP growth of 2.5% next
year, they forecast it will then rise: to 2.9% in 2013; To 2.9% in 2014;
Followed by 2.8% in 2015,” Osborne added.

The downgrade for 2011 brings the official forecast of growth below
consensus. The UK Treasury’s March comparison of independent
forecasters’ revealed am average forecast of 1.8% growth in 2011.

A downgrade to the growth forecast had been widely anticipated
following disappointing Q4 GDP figures which showed the UK economy
contracted 0.6% on the quarter in the final quarter of 2010.

The forecasts are made by independent fiscal watchdog the Office
for Budget Responsibility, which took over the role of forecasting from
the government following last year’s general election.

–London newsroom: 4420 7862 7492; email: wwilkes@marketnews.com

[TOPICS: M$B$$$,MFB$$$,MABDS$,MT$$$$,MFBBU$]