UK survey points out thorns where Bank of England saw roses
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London — The UK economy is likely to be smaller at the end of 2021 than it was before plunging into a record recession in 2020, according to a Bloomberg survey that casts fresh doubt on Bank of England (BOE) projections.
Calculations based on the median estimate of economists polled in August show GDP is set to be about 5% below its prepandemic level. The central bank sees output fully recovering by the same point.
The contrast highlights the risk that policymakers are underestimating the extent of the damage that the coronavirus will inflict on the economy in the long run.
The UK is already rebounding from the depth of the recession, as the government allows more businesses to reopen. But the imminent winding down of state wage-support programmes raises the spectre of mass unemployment and a wave of business failures.
Fears of a renewed spike in infections and the risk of a messy split with the EU will add to the mounting pressure on chancellor of the exchequer Rishi Sunak to extend government aid beyond October, a demand he has rejected so far.
The Bloomberg survey also suggests output could still be catching up by the end of 2022 if the economy maintains its 2021 growth rates, raising questions whether the Office for Budget Responsibility too is overly upbeat about the strength of the recovery.
The fiscal watchdog expects a return to pre-crisis levels by the fourth quarter of 2022, and any growth shortfall could lead it to increase its already stratospheric forecasts for government borrowing.
While authorities around the world are struggling to assess the impact of the worst pandemic in living memory, the extent of the economic fallout leaves little room for policy error.
The BOE’s projections came under scrutiny earlier this month, after economists and investors described its August 6 short-term assessment of the economy as surprisingly upbeat. The Bloomberg survey expects the central bank to keep its benchmark rate at 0.1% but add £50bn to its asset-purchase programme by December.
The survey was carried out from August 7 to August 13, a week in which data showed the economy shrank 20.4% in the second quarter, the biggest slump among advanced industrial nations. Almost 750,000 people have lost paid employment since March.
Unemployment is on course to peak at 8.1% in the fourth quarter, above the high of 7.5% projected by the BOE, and GDP is ...
Calculations based on the median estimate of economists polled in August show GDP is set to be about 5% below its prepandemic level. The central bank sees output fully recovering by the same point.
The contrast highlights the risk that policymakers are underestimating the extent of the damage that the coronavirus will inflict on the economy in the long run.
The UK is already rebounding from the depth of the recession, as the government allows more businesses to reopen. But the imminent winding down of state wage-support programmes raises the spectre of mass unemployment and a wave of business failures.
Fears of a renewed spike in infections and the risk of a messy split with the EU will add to the mounting pressure on chancellor of the exchequer Rishi Sunak to extend government aid beyond October, a demand he has rejected so far.
The Bloomberg survey also suggests output could still be catching up by the end of 2022 if the economy maintains its 2021 growth rates, raising questions whether the Office for Budget Responsibility too is overly upbeat about the strength of the recovery.
The fiscal watchdog expects a return to pre-crisis levels by the fourth quarter of 2022, and any growth shortfall could lead it to increase its already stratospheric forecasts for government borrowing.
While authorities around the world are struggling to assess the impact of the worst pandemic in living memory, the extent of the economic fallout leaves little room for policy error.
The BOE’s projections came under scrutiny earlier this month, after economists and investors described its August 6 short-term assessment of the economy as surprisingly upbeat. The Bloomberg survey expects the central bank to keep its benchmark rate at 0.1% but add £50bn to its asset-purchase programme by December.
The survey was carried out from August 7 to August 13, a week in which data showed the economy shrank 20.4% in the second quarter, the biggest slump among advanced industrial nations. Almost 750,000 people have lost paid employment since March.
Unemployment is on course to peak at 8.1% in the fourth quarter, above the high of 7.5% projected by the BOE, and GDP is ...
