UK’s economy growing fast but faces future Covid ‘scarring’

Growth was being driven by a ‘rebound of consumption, notably of services’, the OECD said.

Britain’s economy is set to grow at a faster pace than expected this year and next year but could face long-term “scarring” following the Covid crisis.

The Organisation for Economic Co-operation and Development (OECD) upgraded its outlook for the UK economy, forecasting growth of 7.2 per cent this year and 5.5 per cent in 2022, due to the success of the vaccination rollout and the easing of lockdown restrictions.

It said growth was being driven by a “rebound of consumption, notably of services”, and that GDP is expected to return to pre-pandemic levels in early 2022.

“Keeping up the pace of vaccinations and responding to emerging virus mutations are key challenges going forward,” the forecast added.

We are at a critical stage of the recovery.

However, the organisation warned that the UK could face the biggest decline in potential output growth on average among the G7 group of countries, while losses are estimated to be relatively small in Japan and the US.

In terms of the global outlook, it has revised up its growth projections across the world’s major economies since the last full outlook in December of last year, putting global GDP growth at 5.8 per cent this year.

OECD chief economist Laurence Boone said that the projections could give “hope” to people in countries hard-hit by the pandemic, who may soon be able to return to work and begin living normally again.

He added: “But we are at a critical stage of the recovery.

“Vaccination production and distribution have to accelerate globally and be backed by effective public health strategies.

“Stronger international cooperation is needed to provide low-income countries with the resources – medical and financial – required to vaccinate their populations.

“Trade in healthcare products must be allowed to flow free of restrictions.”

Responding to the outlook, Chancellor Rishi Sunak said: “The strength of the UK’s growth forecast is testament to the ongoing success of our vaccine rollout and evidence that our Plan for Jobs is working.

“It is great to see some early signs that the UK is bouncing back from the pandemic, but with debt at nearly 100 per cent of GDP, we must also ensure public finances remain on a sure footing.

“That’s why at the Budget in March I set out steps we will take to bring debt under control over the medium term; ensuring our future recovery is sustainable.”

Source: iNews