The official forecast for the budget deficit for 2008/09 and for 2009/10 was in line with expectations. The forecast deficit in 2010/11 was not as large as we suspected, reflecting the combined impact of saving measures and a smaller than expected deterioration resulting from weaker economic conditions.
The underlying cash deficit widens to $57.6bn (4.9% of GDP) in 2009/10, from $32.1bn (2.7% of GDP) in 2008/09 and from a surplus of $19.7bn (1.7% of GDP) in 2007/08. This is against the backdrop of the first recession since the early 1990s. The Government expects the economy to contract by 0.5% in 2009/10, after stalling in 2008/09.
Growth, while resuming in 2010/11 is expected to be sub-trend, at 2.25%. These growth forecasts, which are in line with expectations, are discussed in more detail below.

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