A recovering economy and the 2012 Olympics are predicted to boost the market value of the UK grocery sector to £170bn by 2013.

The sector was worth £139.6bn in 2008, but would increase 4% on average over the next five years, the IGD predicted in its UK Grocery Retail Outlook report this week.

Food inflation had helped grow the market by 4.9% this year, against 3.8% in 2007, IGD said. Growth would slow to 3.1% in 2009, peaking at 4.7% in 2012 before falling to 4.2% in 2013.

"Keeping costs down has become an even greater imperative for business over the past year and this will be key in 2009," said report author Gavin Rothwell. "Market conditions will begin to improve in 2010 and we are predicting further improvements through to 2012 when the London Olympics will deliver a timely boost ."

The growth of discount supermarkets such as Lidl, Aldi and Netto would also continue apace, IGD said. It expected the value of the discounters to grow from £5.5bn in 2008 to £8.5bn in 2013 and market share to increase from 3.9% to 5%.

Online grocery would also double from £3.2bn today to £6.2bn in 2013 as faster home broadband connection made internet shopping quicker, the IGD predicted.