But it believes the pace of recovery looks to be more sluggish in 2011 than previously forecast, following measures announced in the emergency Budget to deal with the deficit.
The outlook for consumer spending next year is now weaker as households will have less disposable income due to ongoing high inflation, resulting from January's VAT rise, and modest wage increases.
In its latest economic forecast, the CBI predicts that the UK economy will grow by 1.6% in 2010, up from 1.3% in its previous forecast in June. The slight upward revision reflects better than expected growth in the second quarter this year as companies began rebuilding their stocks.
The CBI has revised down its GDP forecast for 2011, to 2.0% from 2.5% in June. This takes into account the additional fiscal consolidation measures announced in the emergency Budget, which took place after the CBI's June forecast.
Looking at quarter-on-quarter growth, the CBI expects the economy to grow by 0.3% and 0.6% in the latter two quarters of 2010, having achieved 0.3% and 1.2% growth in the first half of the year. Quarterly growth is then forecast to pick up gradually from 0.3% to 0.6% over the course of 2011.
Although the level of uncertainty around the forecast remains high, the CBI considers that a double dip back into recession is unlikely.
Richard Lambert, CBI director-general, said: "The degree of uncertainty around the outlook remains high, but our view is that the UK's tentative recovery will be sustained, albeit with weaker levels of growth.
"The fragile nature of the recovery is why, in the forthcoming spending review, the Government must focus its scarce resources on those areas which most galvanise growth, namely infrastructure and capital investment."
Ian McCafferty, CBI chief economic adviser, said: "While the outlook for growth in 2010 has been lifted slightly, due to slightly faster economic activity in the second quarter of the year, the outlook for next year will be more restrained.
"The action to get the public finances back onto a sustainable footing will no doubt temper the recovery going into 2011.”
