UK Economic Forecast Report: Q1 2021 Falls Back into Contraction - Richard Oyamo reports
Updated: May 17, 2021
Friday, 14 April 2021 -
Official figures from the Office of the National Statistics show that the UK GDP shrank by 1.5% in Q1 of 2021. The UK, for the last few months, has been amid the strict lockdown as a measure to combat the second wave of the Covid-19 pandemic. However, that quarterly contraction on the economy is relatively modest given economic forecasters had predicted a 1.6% contraction or worse.
Hits from The Second Wave of The Pandemic
The second wave hit the UK in mid-November 2020, causing a high prevalence of infections countrywide, taking a high toll on peoples' lives and the country's public health. Preliminary data indicate that the reintroduction of containment measures that included gruesome lockdowns and other public space restrictions took the biggest hit on the economy.
The second wave saw a decline in business investment, consumer savings, and household consumption as citizens tried to live with the fresh COVID restrictions. On the other hand, economic damage was slightly offset by increased government expenditure and an improved balance of trade.
Vaccination Rollout and An Economic Upsurge in March
With sights set on economic resumption, the turn of 2021 saw a mass rollout of vaccinations that peaked at 845,000 doses per day in mid-March, according to the National Health Service (NHS) UK. The subsequent easing of restrictions in March led to an economic growth of 2.1%. The Office of National Statistics attributes this single-monthly expansion to the post-Brexit trade deal, which came into effect early 2021, that prompted the export of goods and services to the European Union, even as businesses and schools reopened across England and Wales.
The Free Post-Brexit Trade Deal
The December 2020 Brexit trade deal negotiations and its subsequent trade disruptions, coupled with the pandemic, took an unprecedented hit on the GDP, never seen since the recession. But the stark recovery in March has been accelerated by the return of schools and the rejuvenation of the economic sector. Additionally, the manufacturing and construction sectors have adapted well, especially in the face of the pandemic.
Where Does the Economy Stand?
Despite the 2.1% GDP bounce back reported in March, more light is expected at the end of the tunnel. The Bank of England has even predicted that the economy could completely recoup all its pandemic losses by the end of the fiscal year.
However, the UK economy remains 8.6% smaller, which is considerable damage to the economy had the pandemic never struck. But with the successful rollout of vaccines in Q1 OF 2021, forecasters anticipate a sharp economic boom post-pandemic that will see a spike in household consumption and business investment. Lockdown measures have been eased and, pubs and restaurants, for example, have been allowed to operate outdoors. Moreover, the UK prime minister made the much-anticipated announcement; that sporting events can start welcoming fans to stadiums as from 17th May 2021, albeit partially. But with the sharp fall in infection rates, life is expected to regain normalcy more or less.
(Editor: Richard Oyamo)