According to Andy Haldane, the Bank of England chief economist the UK economy is heading for a “V-shaped” recovery after a faster-than-expected rebound from the COVID-19 lockdown.
Mr Haldane said early evidence suggested that the UK restrictions ease saw a surge in consumer spending. The surge is expected to continue as bars and pubs open their doors for the first time since lockdown. An additional £300 million is expected to be spent on the 4th of July.
He said that if the continued recovery keeps to the same path, then the annual GDP might be far higher than first feared, at 8 per cent compared to the 17 per cent forecast last month.
He did point out that “considerable” risk remains, as mass unemployment may occur once the government’s furlough scheme finishes in October.
“Although these risks are, in my view, slightly more evenly balance than in May, they remain skewed to the downside.”
“Of these risks, the most important thing to avoid is a repeat of the high and long-duration unemployment rates of the 1980s, especially among young people,” Mr Haldane said in a speech on Tuesday.
His comments come after the Bank’s governor, Andrew Bailey, warned against getting “carried away” by signs the recession may not be as devastating as predicted.
He added, “the recovery in both the UK and global economies has come somewhat sooner, and has been materially faster. It is early days, but my reading of the evidence is so far, so V.”.
On Tuesday economic figures showed the UK economy had decreased by 2.2 per cent between January and March, down– the most significant fall since 1979.
The record 20.4 per cent contraction in UK GDP in April was described by Mr Haldane as “ancient history”, given the recovery of the UK and global economy.
At a Monetary Policy Committee meeting in June, the Bank’s chief economist was the only one out of nine to vote against increasing quantitative easing.
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