AFP

LONDON

THE Bank of England on Wednesday cut its forecast for British growth and warned that the eurozone debt crisis was the biggest threat to recovery, even if a credible solution is found.

Gross domestic product (GDP) was predicted to grow by just under 1 percent this year, down from the central bank’s previous forecast of just over 1 percent, the Bank of England (BoE) said in a quarterly report.

It also slashed the 2013 growth estimate to 2 percent, down from previous guidance for 3-percent expansion.

Annual inflation was forecast to remain stubbornly above the central bank’s 2-percent target until mid-2013.

“The prospects for UK growth remain unusually uncertain,” the BoE said in the eagerly-awaited report.

“The single biggest threat to the recovery stems from the challenges within the euro area, in particular the need to reduce the indebtedness and improve the competitiveness of some member countries.” It added: “Even if a credible and effective set of policies is successfully implemented, the scale of the necessary adjustments suggests that a prolonged period of sluggish growth and heightened uncertainty is likely.

“A failure to implement such policies could have severe implications for the UK economy.” The central bank also con- firmed that it was still working on contingency plans for the potential break-up of the eurozone.