Economic Recovery To Be Slower Than Expected

(Reuters) – THE ECONOMY will grow just 0.5% next year and 1.5% in 2011, meaning it will take far longer to recover than in previous recessions, business advisory firm Deloitte said in its latest quarterly review.

Deloitte said further shocks to bank’s finances from defaults on mortgages and commercial property leases would limit their lending power further and positive signs that companies were returning to health would be undermined by a return to normal stock orders after a period of re-stocking.

‘The upshot is that there are still a number of reasons to be cautious over the medium-term outlook. At least the economy looks likely to be growing next year — an improvement on the outlook just a few weeks ago,’ said Roger Bootle, Deloitte’s economic advisor.

‘But I expect modest growth of just 0.5% or so. Even in 2011, I think that growth will be a lacklustre 1.5%.’

The review said a rise in demand was unlikely to have any effect on an economy that has a large amount of spare capacity and slowing pay growth. It added that interest rates would likely stay low until at least the end of 2011.

Bootle said the upturn would likely be ‘U-shaped’ and that the economy could conceivably fall back into recession.

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