The amount of spare capacity in the economy is smaller than seemed to be the case a year earlier, the Office for Budget Responsibility said on Tuesday, suggesting there is less scope to rebound from the past recession.
The OBR estimated that it would take until the start of 2014 for Britain to return to its long-term trend rate of growth of 2.3 percent.
The independent fiscal watchdog estimated that the output gap stood at 2.5 percent of GDP, and that it would widen due to slow growth next year, before narrowing again when growth picks up.
The Office for Budget Responsibility said the biggest risk to the government's hopes of hitting its fiscal targets would be a further downward revision to the size of the output gap -- something economists find notoriously hard to calculate.
There is roughly a 60 percent chance of the government meeting its fiscal mandate in 2016-17, compared to a less than 50 percent chance had ministers taken no action in their autumn statement, the OBR said.
A disorderly end to the euro zone debt crisis would pose a significant downside risk to its central forecast, the OBR added.
But (it is) one that cannot be quantified in a meaningful way given the numerous ways in which it might unfold, the watchdog said in its latest economic and fiscal outlook published after Chancellor George Osborne gave his budget statement.
(Reporting by Peter Griffiths)