George Osborne forced to downgrade growth forecasts as borrowing soars
In a major blow, the Chancellor was forced to downgrade the GDP growth forecasts he made just four months ago.
As a result, the UK's debts will also be higher than expected, while the national deficit will come down more slowly than previously thought.
However, Mr Osborne insisted that he will still achieve his target of a budget surplus by the next election - but only by raising an extra £32bn in the preceding 12 months.
He said: "Financial markets are turbulent, productivity growth across the west is too low and the outlook for the global economy is weak. It makes for a dangerous cocktail of risks.
"But one that Britain is well-prepared to handle if we act now so we don't pay later."
The Chancellor said that according to the independent Office for Budget Responsibility, GDP will growth will be slower than predicted in each of the next five years.
This year it will be 2% this year - down from the 2.4% forecast in November. It will be 2.2% in 2017 (down 0.3%), 2.1% in 2018 (down 0.3%) 2.1% in 2019 (down 0.2%) and 2.1% in 2020 (down 0.2%).
On borrowing, Mr Osborne said the deficit will fall over the next five years "but not by as much as before", meaning it will be £55.5bn next year (£6bn more than forecast in November), £38.8bn in 2017/18 (up £14bn) and £21.4bn in 2018/19 (up £21.5bn).
However, he insisted the UK's current account will be in surplus the following year to the tune of £10.4bn - £300m more than previously forecast.
That will be partly achieved by £3.5bn of "efficiency savings" in Whitehall departments pencilled in for 2019/20, he said.
The Chancellor also admitted he would miss his key target of bringing down debt as a proportion of GDP every year of the parliament, conceding it would be "higher in 2015/16 than the year before".
Mr Osborne insisted that despite the grim statistics, the UK economy remained on track.
"We said we would take the action necessary to give Britain's families economic security," he said. "We said our country would not repeat the mistakes of the past and instead live within its means.
"Today we maintain that commitment to long-term stability in challenging times. Decisive action to achieve a £10bn surplus. We act now so we don't pay later - we put the next generation first."
But Shadow Chancellor John McDonnell argued Mr Osborne was using "creative accountancy" to hit his surplus target, and hit out at the disappointing growth figures.
"I just think today demonstrates his fiscal rule has failed," Mr McDonnell told the BBC.
"There isn’t an economist that has supported him on this fiscal rule and everyone was arguing as soon as you control investment [and] you stop investing in the economy, what happens? Your economy stops growing."
TUC general secretary Frances O'Grady said the figures showed the Chancellor's "gamble isn't paying off".
She said: "Far from increasing growth, he’s had to downgrade his forecasts and accept that his plan is failing on productivity and pay...
“A fair budget for the next generation would have delivered far more investment in infrastructure, jobs and homes and fewer eye-catching gimmicks.”