The Confederation of British Industry (CBI) has cut growth forecasts in the UK for 2012 from 0.9% to 0.6% but said the economy will return to growth in the second half.
The Office of National Statistics revealed preliminary data last week that showed the economy had shrunk by 0.3% in the first quarter.
However, the London Olympics and demand for manufacturing, translating into jobs and investment, will lead UK GDP back into positive territory after July, said the CBI, according to the BBC.
Growth in Q2 will be dampened by the Queen’s Diamond Jubilee Bank Holiday but predicted growth of 0.7% and 0.5% in the third and fourth quarters respectively.
John Cridland, CBI director general, said: “We have always said the path back to sustainable economic growth will be a long and difficult one, with many bumps along the way. To rebalance our economy towards exports and investment will take time and patience.”
In 2013, the CBI forecast the UK economy will grow 2% and inflation will hit the Bank of England’s target of 2% that year.
