The economic background to Chancellor George Osborne’s fourth Budget speech could hardly have been more challenging. After he declared that the economy was “on the road to recovery” in his December Autumn Statement, some significant obstacles appeared along that road.

Confirmation that the economy shrank by 0.3 per cent in the final quarter of last year was swiftly followed by the Moody’s downgrading of the UK’s AAA credit rating – the first time since the 1970s that the UK hasn’t held the highest rating possible with this agency.

Manufacturing output fell by 1.5 per cent in January, leaving the UK at serious risk of falling into recession for the third time in five years. Avoiding the triple-dip now looks increasingly unlikely.Against this background, the Office for Budget Responsibility (OBR) revised down its forecast for GDP growth in 2013, from 1.2 per cent down to 0.6 per cent.

The OBR now expects 1.8 per cent growth in 2014 (revised down from two per cent), 2.3 per cent growth in 2015, 2.7 per cent in 2016 and 2.8 per cent in 2017. It projects 600,000 more jobs in 2013 and 60,000 fewer people on employment benefits.The deficit has been reduced to 7.4 per cent of GDP in 2013, from 11.2 per cent in 2009/10. It is expected to fall to 6.8 per cent in 2013/14 and 5.9 per cent by 2014/15.The Government will borrow £114 billion in 2013. Borrowing will then fall year-on-year to: £108 billion in 2014, £97 billion in 2015, £87 billion in 2016, £61 billion in 2017 and £42 billion in 2018.

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