Bank of England: Economy to rebound strongly due to vaccine
The UK’s rapid vaccination programme will help the economy rebound strongly this year, according to the Bank of England.
The economy is expected to shrink 4.2% in the first three months of 2021, amid tighter lockdown restrictions to slow the spread of the virus.
But, it’s expected a rebound in the spring as people become confident in spending again.
The Bank said economic growth was expected to “recover rapidly” in 2021, with a successful vaccination programme supporting a “material recovery in household spending”.
Its latest Monetary Policy Report said the positive vaccine news had driven an increase in UK holiday bookings later this year, though overseas bookings remained muted.
The government support schemes are expected to limit any immediate increase in unemployment – but the unemployment rate is projected to rise to 7.8% later this year as the furlough scheme winds down.
The September to November unemployment rate was 5.0%.
However, policymakers said the outlook for the economy remained “unusually uncertain”.
The rebound in economic activity depends on controlling new variants of the virus and the willingness of the public to spend.
The Bank said most people now expect “life to return to normal” within a year.
But some voluntary social distancing was likely to persist, as it has done in economies where restrictions have already been eased substantially.
In New Zealand for example, spending on restaurants and hotels has still not recovered to pre-pandemic levels.
The Bank said: “The Covid vaccination programme would be expected to lead to an easing of social distancing restrictions, reduced economic uncertainty, and higher activity, although the timing of those effects is hard to predict.”
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