High energy and petrol costs, and continued rocky times in the financial markets will put a dent in consumer spending and slow investment growth to 1.8%, down from 2007's 5.7%, claimed CBI.
The body said the opportunities for 2008 look likely to be overseas, with emerging economies outpacing those more advanced, and a weakening pound helping the export market.
However, inflation is set to peak at around 2.6% and won't hit the target 2.0% until the end of 2009.
The CBI predicted the Bank of England would be prepared to make interest rate cuts in order to ensure this, above and beyond the 0.25% already announced.
CBI chief economic adviser said this is not the preamble to a recession.
"While the 2008 slowdown may appear dramatic set against this year's strong growth, the fundamentals of our economy remain sound," he said.
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