The UK economy will return to growth in the second half of this year, with faster growth expected next year, the CBI has said.
However, it also cut its 2012 growth forecast from 0.9% to 0.6%.
This revision was a "direct consequence" of data from the Office for National Statistics which showed the economy shrank by 0.3% in the first quarter and returned to recession. The CBI said optimism among businesses had picked up since January.
It added that demand for manufacturing was holding up and this was beginning to translate into more jobs and investment.
However it paid reference to "significant challenges" from the global economy, particularly concerns about stability in the eurozone, oil prices, and a confidence among businesses and households.
The CBI now expects flat growth in the second quarter of 2012, dampened by the impact of the additional bank holiday for the Queen's Diamond Jubilee. It does however expect growth to pick up to 2% in 2013.
"Over the winter, the economy has been bumping along the bottom, and with the distortions from an extra bank holiday in the second quarter, is likely to stay that way until summer," said Ian McCafferty, the CBI's chief economic adviser.
"Nevertheless, business surveys suggest that underlying conditions are starting to improve, and that we should see more momentum in the second half of the year."