A business lobby group has cut its economic forecasts for this year and next but insisted the Government was right to stick by its deficit-cutting plans.
The British Chambers of Commerce (BCC) said that despite the reduced growth expectations, its message overall was "still positive" though plans to cut the deficit must be balanced with policies to allow business to drive the recovery.
The group, which also trimmed its unemployment forecasts from 2.65 million to 2.6 million by mid-2012, said the Budget was a positive start but the Government had to do more if the private sector is to create jobs.
It expects the economy will now grow by 1.3% this year, against a previous forecast of 1.4%, with growth of 2.2% the following year, down from a previous estimate of 2.3%. Rising inflation and a squeeze on household incomes prompted the downgrade.
BCC director-general David Frost said he expects a recovery gradually to gather momentum from the fourth quarter of 2011 and strengthen further in 2013 driven by exports and business investment.
The BCC added it expects interest rates to start to increase from August, though it warns that while businesses may be able to absorb small increases, the Bank of England must act with "great caution".
Shadow Treasury minister Chris Leslie said: "The British Chambers of Commerce are just the latest major organisation to downgrade their forecasts for economic growth in the UK and continue to predict a rise in unemployment as deep cuts and tax rises start to kick in.
"Slow growth and more people out of work and on benefits will make it harder to get the deficit down. That's why the Conservative-led Government is now forecast to borrow £46 billion more than they were expecting last autumn. As we have been warning, cutting too far and too fast risks a vicious circle."
But Treasury officials stressed that the economy was creating jobs, with 118,000 more in the first quarter.
A Treasury spokesman said: "The Government welcomes the BCC's continued support for the deficit reduction plan. The plan for growth published alongside the Budget set out the first steps to support a private sector-led recovery, with the next stage due in the autumn."