Economy to slow this year despite rate cuts

By Jonathan Cable

LONDON (Reuters) - Economic growth is expected to slow even more this year, despite further Bank of England rate cuts, but the chances of a recession remain relatively low, a Reuters poll shows.

The quarterly poll of 60 economists, taken April 15-23, showed economic growth at 1.7 percent in 2008, compared with 1.8 forecast in a March poll, and then picking up a tick to 1.8 percent in 2009, down from March's 1.9 percent forecast.

This is a sharp slowdown from the 3.0 percent growth seen in 2007, but the probability of a British recession remains low, with the median forecast giving this only a 30 percent chance within the next 12 months, up five percentage points from March's poll.

Most economists define recession as two consecutive quarters of contracting gross domestic product.

"We expect the UK to avoid recession, but to see an extended period of below-trend growth ... We believe the risks to these forecasts are slanted to the downside," said Howard Archer at Global Insight.

In a separate poll, 42 of 58 economists said the United States was already in recession despite the Federal Reserve slashing 300 points from interest rates since September in an effort to prop up the world's largest economy.

Economies around the world have been undermined by a credit crisis that started with mortgage problems in the United States and has since spread across other markets.

The Bank of England said on Monday it planned to swap banks' risky mortgage assets for 50 billion pounds or more of government bills in the latest bid to spare Britain from the ravages of the global credit crunch.