The business group says the UK recession deepened more than expected in the first three months of this year, but this should prove to have been the worst of the quarterly falls in GDP.
The CBI’s economic forecast reveals that the recovery will be slow and fragile, with GDP growth resuming only in the spring of 2010.
CBI director-general Richard Lambert, says: "The UK economy remains deeply troubled, and the first quarter of this year has been tougher than expected. Firms have been running down their stocks of completed goods, and that is having a real impact on output, jobs and investment. Anxious consumers are spending less and building a savings buffer.
"In these turbulent times it is difficult to build a clear picture of how the economy will perform, but there are a few tentative signs that the steepest phase of the recession is now behind us, and that the banking packages, aggressive monetary policy and fiscal support will steady the pace of decline from here on. The recession is by no means over, but we see a return to very weak growth by spring 2010.
"Given falling tax revenues, the shrinking economy, and alarming levels of government debt, we urge the Chancellor to avoid any further major fiscal boosts in the Budget. Budget measures should be targeted on jobs and investment, with a focus on efficiency savings and public service reform."
The CBI predicts that the economy will have shrunk by a total of 5.1% by the end of this recession, which is not as severe as the cumulative 5.9% seen in the early 1980s recession.
CPI inflation is expected to fall below the Bank of England’s 2 per cent target in 2009 Q2 and to remain there through 2010. The Bank of England is expected to start slowly increasing the UK official Bank Rate from its current 0.5 per cent in spring 2010.
Unemployment is expected to continue to worsen over the next 12 months, breaking 10 per cent in 2010 Q1 and peaking at 3.25 million unemployed (10.3 per cent) in 2010 Q2.
Businesses will continue to scale back on investment in the face of the recession, and business investment is expected to shrink by 9.3 per cent over 2009 and a further 3.4 per cent in 2010.