London  - The Bank of England Wednesday dampened expectations of an early economic recovery in Britain as it predicted that the economy would shrink by 4.5 per cent at its lowest point this year.

Presenting the central Bank's latest quarterly inflation report, chairman Mervyn King said the timing and strength of a recovery remained "highly uncertain."

"The economy will eventually heal, but the process may be slow," said King.

The latest assessment contradicts government forecasts that recovery could set in by the end of 2009.

King's forecast that the economy will shrink by 4.5 per cent at its lowest point is also much gloomier than the 3.5-per cent decline in national output predicted by the government.

"There are pretty solid reasons for supposing that there will be a recovery next year, but also pretty solid reasons for questioning if that will be sustained," said King.

The economy was unlikely to begin to grow again until the middle of next year.

"The prospects for economic growth remain unusually uncertain, reflecting the exceptional economic and financial factors affecting the outlook," the Bank said in the report.

The continuing reluctance by banks to lend money was among the factors hampering a recovery, King made clear.

"It is likely that the supply of credit will continue to be restricted for some while, with banks being risk averse and aiming to raise capital ratios," said King.

Problems in the banking sector were "still unravelling" and had not yet been fully resolved, said King.(dpa)