The Office for Budget Responsibility (OBR) says the UK economy has recovered more strongly since the spring than it had originally expected.
The independent body has revealed that GDP growth was greater than expected in both the second and third quarters, and has revised up its forecast for GDP growth this year from 1.2% to 1.8%.
However, while still expecting growth to accelerate next year, the body lowered its forecast for 2011 from 2.3% to 2.1%, and for 2012 from 2.8% to 2.6%.
The OBR said that its central forecast is that the economy will continue to recover from the recession, but at a slower pace than seen in the recoveries of the 1970s, 1980s and 1990s.
"This relatively sluggish medium-term outlook reflects the gradual normalisation of credit conditions, efforts to reduce private sector indebtedness and the impact of the Government's fiscal consolidation," it added.
Elsewhere in the report, the OBR said that unemployment had fallen to levels that it had not expected until the middle of 2012.
With the Government deciding in the Spending Review to reduce its planned cuts in public services spending with additional cuts in welfare spending instead, the OBR said it now expected general government employment to fall by 330,000 over the next four years, compared to the forecast of 490,000 it had made in June.
Attempting to evaluate the current state of play in the economy against the Government's stated targets, the OBR said its best judgement was that the coalition has a 'better than 50 per cent chance' of delivering a current budget balance in 2015/16 and of seeing public sector net debt fall between 2014/15 and 2015/16.
"We also believe that it has slightly more margin for error in meeting the mandate than the interim OBR thought likely in June," added the report.
"That said, there is clearly significant uncertainty around our central forecast, with risks both to the upside and to the downside."
The Chancellor of the Exchequer, George Osborne, said the figures showed the economic recovery was on track, a double dip recession would be avoided, and that the coalition's plans were working.
Find the best savings rates for you - Compare savings accounts
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
Moneyfacts.co.uk will, like most other websites, place cookies onto your computer’s
hard drive. This includes tracking cookies.