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Alistair Darling predicted the economy will grow between 1.75 per cent and 2.25 per cent over the year.

The chancellor said his first budget will be about "fairness and stability."

The forecast is a cut from the two per cent to 2.5 per cent Mr Darling predicted in October.

Richard Lambert, director-general of the CBI, commented: "The chancellor didn't set the Thames alight, but then he didn't have anything to set it alight with.

"On the surface there are no nasty surprises, but his growth assumptions are optimistic and leave him with little room for manoeuvre should things take a turn for the worse."

In his speech, Mr Darling said: "We will do everything in our power to maintain stability.

"The British economy will continue to grow throughout this year and beyond."

The chancellor added Britain is better placed than other economies to face the economic slowdown.

Mr Darling also said the rate of inflation will rise in the short term, but confirmed the target would remain two per cent.

The chancellor welcomed yesterday's move by the Bank of England to support the financial markets.

Mr Darling called the budget "responsible" and was keen to emphasize that the government would stick to fiscal rules.

Borrowing, at £36 billion, is £1.4 billion lower than forecast at the time of the pre-Budget report, while debt is also forecast to be lower than the pre-Budget report at 37.1 per cent.

Next year, borrowing will rise to £43 billion, some 2.9 per cent of national income, falling to 2.5 per cent, then two per cent, then 1.6 per cent and dropping to 1.3 per cent by 2012/13.