Darling says economy set for "difficult" 2009

LONDON (Reuters) - Britain is "far from through" the recession, Chancellor Alistair Darling said in an interview published on Wednesday in a sign the government no longer expects the economy to recover in the second half of 2009.

Darling predicted in his November pre-budget report that the economy would contract by between 0.75 and 1.25 percent this year but the worst would be over in the first half of this year.

He made no new forecasts in the interview, saying that was a matter for the March budget and that the November predictions of recovery were made on the evidence available at the time.

"In the current climate, no responsible finance minister could say that the job's done, far from it. We are far from through this," Darling told the Financial Times.

"I see 2009 being difficult. We are going to be affected by recession as well as other countries as well," he said.

Analysts polled by Reuters last month reckon output will shrink by 1.6 percent this year as the global credit crunch tightens its grip on businesses and consumers.

The Bank of England has already cut interest rates by a total of three percentage points since October and is expected to reduce them further to an all-time low of 1.5 percent on Thursday.

Darling said the government was also looking at other ways to boost the economy, paving the way for further tax cuts or extra government spending in the March budget on top of the 20 billion pounds package announced in November.

"As we come to the budget, I will be looking at what else I can do to support the economy," he said. "We want to do more to help people as they lose their jobs get back into work ... we need to continue to make sure that we're supporting people in the housing market."

With London chairing the Group of 20 nations club this year, Darling will also be writing to his fellow finance ministers on Wednesday to propose an agenda for toughening financial regulation to guard against protectionism.