Bank predicts ‘slow’ economic recovery

The UK’s economic recovery is likely to be more prolonged than expected, the Bank of England has warned.

In its May Inflation Report, the Bank predicts GDP will begin to turn in mid 2009, but does not anticipate positive GDP growth coming until 2010.

However, it warned that the chances of output being higher in mid-2010 were no higher than output being lower.

‘The prospects for economic growth remain unusually uncertain, reflecting the exceptional economic and financial factors affecting the outlook,’ the Report said.

The Bank’s latest figures cast doubt over those outlined in the Chancellor’s Budget last month. Then the Government predicted a contraction of 3.5% for 2009 and a rise of 1.25% in 2010.

‘There are pretty solid reasons for supposing that there will be a recovery next year, but also pretty solid reasons for questioning if that will be sustained,’ said the Governor of the Bank of England, Mervyn King.

‘But in the light of the state of balance sheets particularly in the financial sector, the committee judges that the risks are weighted towards a relatively slow and protracted recovery.’