The UK economy is expected to emerge from recession through modest growth in the third and fourth quarters of this year, according the CBI.
The CBI said a recovery is underway in the global economy, boosted by substantial fiscal stimulus, plus production is starting to lift. However, it said the pace of recovery in 2010 is expected to slow.
The CBI predicted that UK GDP will post quarter-on-quarter growth of 0.3% in the third quarter of 2009, edging up to 0.4% in the fourth quarter as consumers bring spending forward in advance of the VAT increase in January.
However, it said spend will dampen in early 2010 and as a result, next year will start with weak growth of only 0.1% in the first quarter and 0.3% in the second quarter.
Richard Lambert, CBI director-general, said: “The outlook is improving as the UK draws strength from quantitative easing, a weak pound and a recovering global economy. Although growth this quarter should mark the end of the recession, conditions in the UK will remain tough for some time yet, and it is difficult to see where demand growth will come from.
“Firms that have run down their stocks will now be starting to raise output to meet demand, and consumers are likely to bring forward spending before VAT rises. But once these two boosts are out of the way there is no clear driver of robust economic growth into 2010.”
After five consecutive quarters of contraction, UK GDP has fallen by a cumulative 5.5%, which is close in magnitude to the cumulative 5.9% seen in the early 1980s. The CBI forecasts that GDP will shrink by 4.3% in 2009 and grow by 0.9% in 2010.