In its latest Economic Outlook, the Organisation for Economic Co-operation and Development said the UK economy will shrink in the fourth quarter and Q1 2012.
The OECD said weak international demand, continued retrenchment among households and needed fiscal consolidation have halted the recovery.
It is predicting GDP will contract by 0.1% in Q4 of 2011 and by 0.6% in Q1 of 2012, and has revised its growth forecast for 2012 down from 0.9% to 0.5%.
However, the think-tank expects growth of 1.8% in 2013 following a recovery in exports and household consumption.
The OECD commended the “supportive” monetary policy from the Bank of England but suggested “further expansions of quantitative measures are warranted”.
The BoE will have to hold rates at 0.5% until at least the end of 2013 and conduct another £125bn of quantitative easing, taking its total to £400bn, the OECD said.
Meanwhile it predicted unemployment will reach 9% in 2013, while inflation will fall below the 2% target.
The OECD described the euro area crisis as the “key risk to the world economy” and warned the contagion could spread to “countries thought to have relatively solid public finances”.
Euro area growth is expected to drop from 1.6% this year to 0.2% next year, before picking up to 1.4% in 2013, the OECD said, while US GDP will pick up from 1.7% this year to 2% in 2012 and 2.5% in 2013.
The British Chamber of Commerce also released its economic outlook today, predicting GDP growth of 0.9% in 2011, 0.8% in 2012 and 1.8% in 2013.
The figures were revised down from the BCC’s precious projections of 1.1% this year, 2.1% in 2012 and 2.5% in 2013.
