Forecasts from the new Office for Budget Responsibility (OBR) point to growth of 1.2 per cent in gross domestic product this year, 2.3 per cent in 2011 and figures of around 2.7 to 2.9 per cent in the following four years. If these numbers are achieved, good things begin to happen. Unemployment starts to peak in the New Year. Tax revenues rise, and a good chunk of our fiscal deficit simply melts away.

But if this growth does not materialise, we are all in trouble. The squeeze on public sector jobs will not be offset by expansion in the private sector. And our fiscal problems, already considerable, will become even harder to manage.

Business is right at the heart of the recovery story. The OBR hopes that investment in stock and working capital – which took such a pasting over the past couple of years – will pick up smartly this year and next. It thinks that overall business investment in plant and fixed assets will start a long period of steady growth in 2011. And it expects that the contribution from net trade will kick ahead from next year onwards, as exporters take advantage of the sterling devaluation.

How realistic are these assumptions? Given the sheer depth of the recession, the pace of the projected recovery does not look like much to write home about. Even so, the OBR makes it clear that its numbers are hedged with uncertainties. And there’s only so much the chancellor can do to encourage the necessary expansion in business investment.

The CBI gave him quite a few ticks for his Budget effort. We liked his determination to get rid of the fiscal deficit as soon as practical, and to do it more by cutting current spending than by raising taxes. We applauded his recognition of the fact that certainty and consistency are matters of great importance in tax policy, and we gave three cheers for his promise to create the most competitive corporate tax system in the G20. That is what we have been campaigning for over the past three years.

But none of this will be enough by itself to drive the necessary increase in private sector investment and trade. So the big question today is about how monetary policy responds to this unprecedented fiscal squeeze. And the answer to that question does not lie in the chancellor’s hands.

George Osborne has often said that a tighter fiscal policy will allow the Bank of England to leave monetary policy looser for longer – in other words, to keep interest rates low and allow credit to expand. That assumption is now going to be tested.

To what extent will the Bank be willing and able to lean against the coming fiscal squeeze? It can’t do much to cut nominal interest rates, with the bank rate already down close to zero. So if things start to slow down, will it be ready to restart its quantitative easing programme – and perhaps do more to help the business sector by buying corporate bonds as well as government securities?

And will the banks themselves feel confident enough to pass on the benefits to their customers in the shape of easier credit conditions?

Part of the answer to these questions depends on the outlook for inflation – and the fact that one member of the Monetary Policy Committee voted for a rate increase at the last meeting will have sent a shiver down the Treasury’s collective spine.

Part depends on the willingness of the Bank to be bold – and governor Mervyn King has dropped some pretty heavy hints that if the chancellor was ready to stick his neck out on the fiscal side, he would do the same when it came to monetary policy.

And part depends on how the commercial banks themselves respond to the pressures that have been piling up on them from every side. Osborne told the Mansion House dinner last month that the fog of uncertainty over the banks was leading them to hoard excessive amounts of capital instead of lending it to business. So the sooner the banks better understand the new regulations under which they will have to operate, the better for all of us.

Our best bet at the CBI is that the economy will continue to move slowly ahead, despite the impact of public spending curbs. Indeed, our latest forecast is broadly similar to that of the OBR. But it is built on growth in business investment – and that will happen only if credit conditions make it possible.

Watch this space.