The UK economy will see growth in the second half of the year after falling into recession in the first quarter, according to the Confederation of British Industry.
It predicts gross domestic product will grow by 0.6 per cent this year, slightly down from its forecast of 0.9 per cent in February.
The revision comes after the Office for National Statistics revealed the UK economy shrank by 0.2 per cent in the first quarter.
This was the second quarter of negative growth, pushing the UK back into a technical recession.
The CBI predicts growth will be flat in the second quarter, affected by the impact of the additional bank holiday for the Queen’s diamond jubilee.
But it forecasts an improvement in the second half of the year, with growth of 0.7 per cent in the third quarter and 0.5 per cent in the final quarter.
The CBI forecasts that growth will be 2 per cent in 2013 and inflation will fall from its current level of 3.5 per cent towards the Government’s target of 2 per cent by spring 2013.
However, the National Institute of Economic and Social Research forecasts zero growth this year and around 2.3 per cent in 2013, which is unchanged from its January forecast.
CBI director general John Cridland says: “Despite the disappointing GDP estimate for the first quarter from the ONS, we still think the UK economy will grow in 2012, with faster growth next year.
“Optimism among businesses has been increasing since the turn of the year, with manufacturing demand holding up, and that is beginning to translate into more jobs and investment.”
Chapters Financial director Keith Churchouse says: “I would be surprised if we see much growth at all this year but I remain hopeful that we will see around 2 per cent next year.”