In the Bank of England’s latest forecast for economic growth and inflation it predicts the UK economy will fall dramatically in the first half of the year, shrinking by 4% from mid-2008 to mid-2009.
And the recession could be longer than first anticipated.
King says: “Restoring both lending and confidence will not be easy and will take time.”
It predicts a decline of around 3% for the whole of 2009, but with a sharp recovery and positive growth in 2010.
But King predicts the recession could be deeper if: “the authorities at home and abroad are only partially successful in improving the availability of credit and restoring business and consumer confidence.”
King also says that inflation will remain below its 2% target by the end of its two-year forecast period.