global economy

IMF cuts Britain’s 2021 growth outlook after COVID-19 surge

Reuters
IMF cuts Britain’s 2021 growth outlook after COVID-19 surge

SNOWFALL. People cross the Westminster Bridge during snowfall in London, Britain, January 24, 2021.

Photo by Toby Melville/Reuters

Britain's growth downgrade reflects a 2nd wave of COVID-19 cases in late 2020 and a 3rd wave in early 2021, driven by a new variant of the virus

The International Monetary Fund (IMF) cut Britain’s growth outlook for 2021 on Tuesday, January 26, due to a resurgence in coronavirus cases, and forecast it would take until next year before the economy regains its pre-pandemic strength.

For the world economy as a whole, the IMF was slightly more optimistic than in its last set of forecasts in October, upgrading the outlook for global growth in 2021 by 0.3 percentage points to 5.5%.

But it cut Britain’s growth outlook by 1.4 percentage points to 4.5%, a sharper downgrade than its 1-percentage-point reduction for the euro zone.

The IMF estimates Britain was the worst-hit of the world’s 7 largest advanced economies last year, suffering a 10% decline in output, although Spain – which is outside the top 7 – experienced an 11.1% fall.

Recovery will take time, both in Britain and elsewhere in Europe.

“The US and Japan [are] projected to regain end-2019 activity levels in the 2nd half of 2021, while in the euro area and the United Kingdom activity is expected to remain below end-2019 levels into 2022,” the IMF said.

The Bank of England forecast in November that Britain’s economy would regain its pre-pandemic size in the 1st quarter of 2022, while economists polled by Reuters on average think it will take at least two more years.

IMF chief economist Gita Gopinath told a news conference in Washington that Britain’s growth downgrade reflected a 2nd wave of COVID-19 cases in late 2020 and a 3rd wave in early 2021, driven by a new variant of the virus.

Britain’s government imposed an open-ended lockdown on January 5 which has closed schools and most non-essential businesses that were open to the public, likely tipping the economy back into contraction in early 2021.

Brexit disruption in the 1st quarter of 2021 was also likely to reduce output by around 1%, Gopinath added.

“We have a revision up going forward for 2022, when we should see growth coming back. It is kind of a lagged recovery that we have,” she told reporters. – Rappler.com

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