The economy should contract by 2.8 percent this year, the forecasters said in updated projections. That’s worse than the 1.9 percent drop they forecast in late February. If they are right, it would mark the worst annual contraction since 1946, when economic activity fell by 11 percent.

Still, the forecasters believe the worst is already behind the country in terms of lost economic activity.

The economy shrank at a 6.1 percent annualized pace in the first three months of this year, on top of a 6.3 percent decline in the final three months of last year, the worst six-month performance in 50 years.

For the current April-June quarter, the NABE forecasters believe the economy will shrink at a pace of 1.8 percent. After that, the economy should start growing again — at a 0.7 percent pace in the third quarter and a 1.8 percent pace in the fourth quarter.

NABE’s growth projections for the third and fourth quarters are lower than those made in late February. The downgrade was based on the expectation that businesses, whose profits and sales were hit hard by the recession, will remain wary of ramping up investment.

President Barack Obama’s USD 787 billion stimulus package of increased government spending and tax cuts, near-zero interest rates ordered by the Fed and government programs to get banks to lend more freely again all factor into the expected economic revival.

Many forecasters also predict that home sales will hit bottom by the middle of this year, another stabilizing factor for the economy. A report on sales of previously owned homes will be released Wednesday, and data on new-home sales is due Thursday.

Next year, the economy should grow by 2 percent, the forecasters said. That was lower than the 2.4 percent growth projected in February.

With a lethargic recovery expected, forecasters predict the Fed won’t start boosting interest rates until the second quarter of next year.

Because Fed policymakers expect credit and financial problems to ebb slowly, “the pace of the recovery would continue to be damped in 2010,” they said last week.

source: Zee news

Tags: end of recession, forecash recession, recession, recession end 2009

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