DOUBLE DIP DODGE
The UK set to dodge a double dip recession thanks to jab roll-out, says Bank of England
THE UK is set to avoid a damaging double dip recession — and is poised for a rapid recovery thanks to the vaccine roll-out.
The Bank of England now reckons the economy expanded by 0.6 per cent in the final quarter of 2020.
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The economy was surprisingly resilient during November’s lockdown. Yesterday’s revision by the Bank means a second dip to the recession — defined as two successive quarters of falling output — is set to be avoided, despite the economy contracting in the current lockdown.
The Bank’s Governor Andrew Bailey said: “Many of the numbers (for the end of 2020) were stronger than we expected last November.” And the progress of the vaccination roll-out was “very good news” that would lead to a “more condensed recovery” from late spring as restrictions are lifted, he predicted.
He believes Brits will then gain confidence to spend the savings they have built up during the lockdowns — triggering a rapid recovery in the second half of this year. He said of the jabs roll-out: “I want to congratulate and pay tribute to everybody who’s involved — it’s a great story and it is reflected in our forecast.”
His outlook for next year 2022 is also brighter thanks to the vaccinations — although the expected four per cent contraction in the first quarter of this year will weigh on overall growth in 2021.
Yesterday the Bank slashed its overall growth forecast for this year to five per cent from 7.25 per cent. However, it hiked its prediction for next year from 6.25 per cent to 7.25 per cent.
The forecasts came after the voted to keep rates on hold at 0.1 per cent and keep the Bank’s quantitative easing programme unchanged at £895billion.
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Howard Archer, economist at the influential EY Item Club, said the Bank kept rates on hold as it “chose to look to the brighter longer-term prospects for the economy which will stem from the progressive roll-out of the vaccines”.
The Bank also revealed it believed it was “appropriate” to begin preparations for adding negative interest rates to its monetary policy “toolkit” — in six months’ time.
It has told lenders to get systems ready, but stressed negative rates are not imminent, nor inevitable.
UK economy shrinks again by 2.6% in November as England hit by second lockdown
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