The outlook for growth in the world economy had deteriorated, the Governor of the Bank of England, Sir Mervyn King said yesterday.

He warned the global debt crisis, which helped cause turmoil in world stock markets in recent days, would take “a number of years” to be resolved.

He said: “The problems of indebtedness are large and not easy to tackle but we have to face up to it and find a way through it.

“The year 2008 was not the end of the crisis, it was one stage of the crisis and we are going through another stage now before, I hope, we come to an end of it.”

Sir Mervyn said the UK’s economy would not grow as quickly as previously expected and faced serious threats from the debt storms lashing the eurozone. GDP is set to grow by about 1.4 per cent this year, down from the Bank of England’s estimate of about 1.8 per cent in May.

It is the second time the Bank of England has downgraded the UK’s growth forecasts this year, having previously expected growth of about two per cent.

And it is expecting that next year’s growth will also be significantly slower than previously thought at about two per cent – down from about 2.5 per cent.

The UK’s growth was likely to be “sluggish” but would gradually grow to stronger than normal by 2014.

The near-term squeeze on consumer spending is set to continue and there was ­­­­a “good chance” inflation would reach five per cent in the coming months, driven by rising utility bills.