UK economy to hit pre-pandemic level late 2021: Bank of England governor

LONDON: Britain’s economic activity will return to its pre-coronavirus level at the end of this year following the country’s vaccine rollout, Bank of England (BoE) governor Andrew Bailey forecast on Monday.

“This Covid effect on the economy is huge,“ Bailey said in a BBC interview.

“What we are saying with the recovery is that the economy will actually get back in terms of activity to around the end of this year, to where it was at the end of 2019.

“That’s good news. But let’s be realistic – it’s not more than getting back to where we were pre-Covid,“ Bailey added.

He heaped praise on the British government’s rapid vaccination drive that has injected around 24 million Britons with their first jab.

“I’m now more positive (on the outlook) but with a large dose of caution,“ Bailey said.

He said the vaccine programme has been a “great achievement” and that while the lockdown has been painful, “we are seeing the retreat of Covid”.

The pandemic sparked a 10% slump of UK economic output last year – the worst annual performance in more than three centuries.

The earlier-than-expected recovery – the BoE’s expectation had been for early 2022 – comes ahead of the central bank’s latest interest rate decision on Thursday. The BoE is expected to keep its benchmark interest rate at its historic low of 0.1% and its bond-buying programme unchanged at £895 billion (RM5.13 trillion).

Bailey said he expected the BoE’s next economic forecasts would show unemployment peaking at a lower level than the 7.75% jobless rate it predicted in February, after finance minister Rishi Sunak extended his programme to protect jobs on March 3.

He also repeated the BoE’s message that the central bank would want to see more evidence than usual that it was hitting its 2% inflation target sustainably, and he said he did not see any signs of a big overshoot to 4% or 5%.

Bailey added on Monday that the economy had displayed more resilience during the government’s current third lockdown compared with the initial virus shutdown in the first half of 2020.

Bailey’s comments contrasted with the message from the European Central Bank. The ECB said last week it would accelerate money-printing to keep a lid on eurozone borrowing costs which it feared could derail a recovery.

Meanwhile, confidence among people in Britain about the economy over the next 12 months has jumped by the most on record, polling firm Ipsos MORI said.

It said 43% of Britons think the country’s economy will improve, up 14 points from last month, it said.

Fourteen per cent said the economy will stay the same while 41% thought it would get worse, a fall of 19 percentage points from a poll last month. The +2 net balance represented the highest degree of optimism since 2015, Ipsos MORI said. – Reuters