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UK #GDP rose by 1.2% m/m in December and 1.0% q/q in Q4 2020. This was better than expected, including by the OBR, and means that (unlike the eurozone) the UK should avoid a 'double-dip recession'. But the full year fall of 9.9% was still one of the worst in the world... (thread)
There are many reasons why UK #GDP fell further in 2020 than in most other countries, including policy decisions (such as the timing/severity of #lockdowns), but also geography, demographics, the composition of the economy, and differences in the measurement of GDP itself…
On a like-for-like basis, the fall in UK #GDP was probably similar to that in France or Italy. Even on the official numbers, GDP fell further in #Spain (by 11.0%), mainly due to the Spanish economy’s greater dependency on #tourism...
The UK economy also performed better last year on other measures.
Most importantly, #unemployment is still relatively low compared to other countries. This has required a huge increase in government borrowing to protect jobs, but the #debt/GDP ratio remains relatively low too.
Most importantly, #unemployment is still relatively low compared to other countries. This has required a huge increase in government borrowing to protect jobs, but the #debt/GDP ratio remains relatively low too.
Looking forward, the third national #lockdown means that the economy will almost certainly contract again this quarter (perhaps by 4%). The March #Budget2021 should therefore focus on supporting the recovery and it would be madness to raise taxes now…
Nonetheless, the UK economy and labour market are holding up much better in this #lockdown than the first. The relatively early rollout of the Covid #vaccines should also allow the brakes to be taken off sooner than in many other countries.
I therefore remain relatively optimistic.
UK #GDP should recover quickly in the second quarter onwards and return to pre-Covid levels later this year. FWIW, I also expect #unemployment, currently about 5%, to peak below 6%.
UK #GDP should recover quickly in the second quarter onwards and return to pre-Covid levels later this year. FWIW, I also expect #unemployment, currently about 5%, to peak below 6%.
PS. the impact of #Brexit on GDP (in either direction) will obviously be swamped by the impact of the pandemic. But I’m assuming the initial disruption to trade continues to ease and that the reduction in Brexit uncertainty contributes to a strong recovery in business investment.
