The coalition made a mistake in cutting back capital spending when it came into office, Nick Clegg has said.
The deputy PM told The House magazine that ministers had reassured themselves at the time that the reduction was in line with plans drawn up by Labour.
But they now realised investment in infrastructure was crucial for economic recovery, he added.
His comments came on the eve of fresh GDP figures - which may show the UK economy is contracting once again.
If the figures show the economy shrank in the final three months of 2012 they will be held to show that Britain risks suffering a "triple-dip" recession.
Labour said Mr Clegg's comments were the coalition's first admission of a "serious mistake" on the economy.
'Foster recovery'In an interview with the magazine, Mr Clegg said: "If I'm going to be sort of self-critical, there was this reduction in capital spending when we came into the coalition government.
"I think we comforted ourselves at the time that it was actually no more than what [former Chancellor] Alistair Darling spelt out anyway, so in a sense everybody was predicting a significant drop off in capital investment.
"But I think we've all realised that you actually need, in order to foster a recovery, to try and mobilise as much public and private capital into infrastructure as possible."
He said more capital investment would create jobs and help the economy in the long run.
In his Autumn Statement, Chancellor George Osborne announced an additional £5bn of investment spending, including £1bn for road upgrades and £1bn for schools expansion.
End Quote Rachel Reeves Shadow chief secretary to the TreasuryWe have urged ministers to bring forward infrastructure investment and build thousands more homes, but they have refused to listen. "
Conservative health minister Anna Soubry told the BBC's Question Time there was "some merit" in the deputy prime minister's comments.
She said: "At the beginning we weren't making - and this was very early on in the coalition - big capital expenditure.
"But then if you look at what's been rolled out, certainly if I look at my own region... there has been phenomenal investment by this government in the infrastructure, and rightly so."
Asked about the prospect of a triple-dip recession, Mr Clegg said the "overwhelming" economic evidence showed more capital spending would help.
And he said more would need to be done to "put money back in the pockets of people on middle and low income".
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Anna Soubry: "There may be some merit that at the beginning...we weren't making big capital expenditure"
If the economy falls into recession (that is, suffers two consecutive quarters of negative growth) three times in since the slump of 2008) commentators will regard it as a "triple-dip" recession.
The UK registered a double-dip recession last year, contracting for three quarters in a row before bouncing back with growth of 0.9% in the three months to September.
Mr Osborne has said UK spending cuts must continue if the government is to retain credibility.
His comments came as a rebuff to the International Monetary Fund's chief economist, Olivier Blanchard, who called for the UK to slow down its austerity programme.
"We have a credible and flexible debt reduction plan. That credibility is very hard won and easily lost," said Mr Osborne.
Labour's Rachel Reeves said of Mr Clegg's comments: "This is the first admission that this government has made serious mistakes on the economy.
"But the real question is what Nick Clegg's government is going to do about it. We have urged ministers to bring forward infrastructure investment and build thousands more homes, but they have refused to listen.
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