(Adds industry minister comments, background)

By Jason Subler

BEIJING, Dec 19 (Reuters) - Royal Bank of Scotland on Friday slashed its forecast for China's 2009 gross domestic product growth to 5 percent, from 8 percent, warning about the potential for increasing social tensions as the economy falters.

Exceptionally weak activity data for November, released over the past week, has prompted a number of investment banks as well as the International Monetary Fund to either revise down or warn of possible downgrade to their China growth estimates.

But the RBS forecast, based on expected sharp drops in household consumption, residential investment and exports, is now the lowest of the major banks.

Forecasts in a Reuters poll published last week and conducted before the release of November data centred on a growth rate of 8 percent. [ID:nPEK349561] The economy expanded by 9 percent from a year earlier in the third quarter, compared with 11.9 percent in all of 2007.

"It is not a recession, but it will feel like one to the average citizen and will feel like a depression to the 100 million or so migrant workers, many of whom are out of a job and stranded far from home," economists Ben Simpfendorfer and John Richards said in a note to clients.

"Social tensions are likely to be on the rise."

Beijing would be alarmed about any slowdown of that degree, as it would not enable the economy to produce enough jobs to soak up the millions of people seeking to enter the workforce each year, potentially feeding into social unrest.