Britain's economy will stage just a sluggish recovery this year, public finances will fall further into the red and house prices could tumble, a report said today.
The report, by the British National Institute of Economic and Social Research (NIESR), predicts the economy will grow only 2.2 per cent this year and 2.4 per cent in 2004.
The figures are below NIESR's forecast made in October, and also below British Chancellor Mr Gordon Brown's predictions made in his pre-budget report in November of growth of 2.5 per cent to 3 per cent this year, rising to 3 per cent to 3.5 per cent in 2004.
Report author Mr Martin Weale said: "The economy will stage only a sluggish recovery this year".
He said as in 2002, the main drivers of demand will be the consumer and the public sector, but the main drag on the economy would be exports.
NIESR also forecast that Britain's public finances will slide deeper into the red with net borrowing forecast to rise to £28.6 billion in 2004-2005 against the treasury's forecast of £19 billion.
NIESR also forecast there was a 60 per cent probability that the current budget account - a measure of borrowing excluding investment - would still be in deficit in 2005-2006.
The institute predicted the housing boom would lose momentum, so that house prices would rise just 4 per cent in the year to the fourth quarter of 2003.