Darling cuts growth forecasts in budget

By Sumeet Desai

LONDON (Reuters) - Chancellor Alistair Darling cut growth forecasts and sharply ramped up borrowing on Wednesday as the economy faces tough times and his government slides in the polls.

In his first budget, Darling blamed the global credit crisis for having to lower expected economic growth this year to a range of 1.75-2.25 percent and for 2009 to 2.25-2.75 percent.

He also raised borrowing by a much greater than expected 7 billion pounds for the coming fiscal year, in a sign the government may be building up a war chest for an election.

"We have seen significant disruption across many credit markets with a number of them barely functioning at all. And since the turn of the year, global stock markets have also been affected," the 54-year-old Scot told parliament.

"This poses a major risk to the world economy," he said, but insisted Britain was better placed to weather the slowdown than most.

In October's pre-budget report, Darling forecast growth at 2.0-2.5 percent in 2008 and 2.5-3.0 percent in 2009.

In contrast, a Reuters poll of around 60 economists put economic growth at 1.8 percent in 2008, picking up only slightly to 1.9 percent in 2009.

Darling said government borrowing would hit 43 billion pounds in the coming financial year and 38 billion the year after, well above the public sector net borrowing of 36 billion pounds and 31 billion that he pencilled in October.