Economy forecast to grow 0.8%

THE CONFEDERATION of British Industry raised its economic growth forecast yesterday as it published a survey showing manufacturers were expecting output to rise for the first time in more than a year.

The CBI said the economy would grow by 0.8 per cent this year, accelerating to 2.1 per cent in 2000 - an upward revision of 0.3 per cent. It also predicted interest rates would fall by 0.5 per cent to 4.75 per cent.

Kate Barker, CBI chief economic adviser, said sterling was forecast to fall to 72 pence to the euro by the end of 2000. "As the UK recovery remains fragile, an early 0.25 point cut in interest rates would be fully justified," she said. A separate CBI survey showed 31 per cent of firms expected output to increase over the next four months while 16 per cent forecast a fall, leaving a balance of 15 per cent.