London, April 9 (Bloomberg) -- U.K. Chancellor of the Exchequer Gordon Brown cut his economic growth forecast for the second time in five months. Europe's second-biggest economy after Germany will expand between 2 percent and 2.5 percent this year, Brown said in his annual budget speech to parliament. In November, he predicted growth of between 2.5 percent and 3 percent. Britain, whose economy was among the fastest growing in the 15-member European Union last year, is being buffeted by a slide in demand for exports, a decline in manufacturing and worsening confidence among consumers whose spending accounts for more than half of gross domestic product. ``The future is looking more difficult for the economy,'' Shamik Dhar, a former Bank of England economist who helps manage $290 billion at Morley Fund Management Ltd., said before Brown's speech. ``His forecasts have to come down to something more realistic.''
Next year and in 2005, the economy will probably expand between 3 percent and 3.5 percent, Brown said. Last year, he predicted growth of as much as 3.5 percent for 2004. The U.K. economy grew 1.8 percent last year. The U.S. economy, the world's largest, will grow 2.4 percent this year, according to the average of forecasts by 53 economists in the April Blue Chip survey. That would match growth in 2002.
Deteriorating Finances
Britain's public finances are deteriorating for the first time since 1997 when Tony Blair led Labour to victory in that year's election after 18 years of Conservative Party rule under Margaret Thatcher and John Major. This year's deficit will erase the last of the surpluses accumulated in previous years, and may be followed by tax increases before the next election, which must be called by 2006, economists said. Blair and Brown are trying to meet election pledges to improve education, health care and public transport at a time when faltering economic growth is eroding revenue. Manufacturing fell 4 percent last year, the most since 1991 and the trade deficit widened to the worst since records began in the 17th century, according to government figures. Exports dropped 2.5 percent. Consumer confidence declined to an eight-year in March, a survey of 2,000 people by Martin Hamblin GfK for the European Union showed on March 28. Retail sales fell for a second month in February. //www.bloomberg.com