The CBI has joined the ever growing list of forecasters predicting 2009 will see a worse economic performance than 2008.

It has lowered its forecast for 2008 by a small amount, down 0.1 per cent to 1.7 per cent, but expects 2009 to see growth of just 0.7 per cent, the lowest since 1992 when the economy expanded by 0.5 per cent.

Richard Lambert, the CBI’s Director-General said: “Over the past year, the CBI has consistently had to revise down its forecasts for economic growth. The main reason is that the oil price – measured in depreciated sterling – has continued to rise strongly, roughly doubling since the spring of 2007. This has squeezed household incomes and companies’ profit margins, and has also made it much harder for the Bank of England to cut interest rates in the face of the economic slowdown.

“Our best bet is still that there will be a measure of economic growth in 2009. But the outlook has deteriorated in recent months, and considerable uncertainties remain.

“That said it is important to remember this is not a forecast for recession. Back in the early 1990s, we had a prolonged period of plummeting consumer demand and there were large job cuts across the board.

“These days, firms are leaner and more efficient and our economy’s reach is far more global. We should avoid believing a recession is inevitable, or talk ourselves into unnecessary trouble.”