Darling says growth set to resume

Growth is set to resume by the end of 2009, and the government does not plan to alter its economic forecasts, Chancellor Alistair Darling told a newspaper.

"I am not going to change my forecasts," the Times quoted Darling as saying in its Wednesday edition.

"I remain confident that we will see a return to growth at the turn of the year."

The government expects the economy to expand by 1.25 per cent in 2010 after shrinking by 3.5 per cent this year. Its predictions are more optimistic than some other forecasts, with the International Monetary Fund expecting a further 0.4 per cent contraction next year.

However, Darling said the country's recovery prospects will depend on whether other members of the Group of 20 world economies fully implement the stimulus package they agreed last month, and on whether banks honour commitments to increase credit availability.

"I remain confident that we will come through this, provided we ensure that we deliver what we set out at the G20, and what we are doing ourselves, particularly in relation to ensuring that the bank-lending agreements are fully implemented," he told the Times.

Darling also said the government was in no rush to sell its stakes in partly nationalised banks, as its priority was to dispose of them at a good price.

"I am determined that we get the best possible deal for the taxpayer, so I am in no hurry there," he told the Times.

Yesterday, sources told Reuters that the government had held talks with investors to gauge their interest in buying its bank stakes, acquired as part of a multibillion pound bailout of the banking sector last year.

Darling also moved to soothe fears that official figures yesterday showing a bigger than expected fall in inflation were a sign the economy is heading towards deflation.

The decline in inflation "is in line with expectations. Deflation is quite different," he said.