This is the biggest revision between budgets in thirty years.
In the last Autumn Statement, the Office for Budget Responsibility predicted expansion of 2.4% this year.
The revised growth may mean that the economy's spare capacity is used up more quickly. If so, growth in future years may be revised down, with knock-on implications for the public finances.
The Chancellor commented:
"Six years ago Britain suffered a Great Recession. We had the biggest bank bail out in the world. We had the biggest deficit since the war. We suffered the deepest recession in modern times. But later this year the OBR expects Britain to reach the point when our economy is finally larger than before it collapsed six years ago.
"That’s because we’re now growing faster than Germany, faster than Japan, faster than the US – in fact there is no major advanced economy in the world growing faster than Britain today. But we should be alert to the risks. The euro area is slowly recovering but as the OBR caution “further damaging instability remains possible”. There is volatility in emerging markets. And while for now the OBR do not expect the situation in Ukraine to have a “large impact” on us, they warn that an escalation risks higher commodity prices, higher inflation and lower growth. It’s a reminder of why we need to build our economy’s resilience."
