Britain’s Confederation of British Industry (CBI) is forecasting a sluggish and bumpy journey to recovery for the economy.

The CBI, Britain’s largest employers’ group, said in its latest economic forecast published on Monday that it expected near-term growth to be weak, hit by the withdrawal of stimulus measures such as the lower rate VAT and the car scrappage scheme. It also forecast that economic fears would mean consumers would be careful spenders, preferring to save and pay off debt than to spend.

Ian McCafferty, the chief economic adviser at the CBI, said: ” The state of the public finances means this recovery will be led by the UK consumer, private sector investment and the rebuilding of stocks. But headwinds from tight credit conditions and the desire to borrow less and pay down debt will hold this back somewhat.

“After peaking in the autumn, unemployment will come down very gradually next year. With inflation likely to fall back quite sharply because of the large amount of spare capacity in the economy, monetary policy will remain easy, though the Bank is expected to move away from the current emergency 0.5 percent rate later this year.”

The economy is forecast to grow by 0.3 percent and 0.4 percent in the first two quarters of 2010, and then to up the pace to 0.5 percent in the final two quarters, said the CBI. It expected 2011 to see stronger growth, driven by global demands, a return to spending by consumers, and renewed business investment.

Despite inflationary pressures, seen in the high January figure of 3.5 percent and the weak pound driving up the costs of imported goods, the CBI forecast that the Bank of England would put up interest rates, currently at an historic low of 0.5 percent, towards the end of the year, with further increases during 2011 to bring it up to 2 percent.

Unemployment will continue to rise towards a peak at 2.75 million in the autumn, before falling back again, The CBI predicted.

With a general election looming, it must be held before the first week in June with a likely date of May 6, the CBI’s director general Richard Lambert called for a “credible plan” to deal with the government’s public sector borrowing requirement, forecast to hit 176 billion pounds this year, in order to convince international investors of Britain’s ability to recover from the recession.

“The lack of a clear driver for growth makes for a bumpy rise for the months ahead. To convince international investors that the spiraling budget deficit will not derail the economy, the government must set out a credible plan to balance the books by 2015-15, two years earlier than planned. It must also avoid damaging tax rises.”

VietNamNet/Xinhuanet