The UK economy is on course for a V-shaped recovery from the coronavirus crisis though the risk of a prolonged period of unemployment remains, according to the Bank of England’s chief economist.
Britain is widely expected to have entered a steep recession as a result of the lockdown – but it appears to be bouncing back more quickly than previously expected, Andy Haldane said in a webinar speech.
He said the economy was benefiting from a rebound in consumer confidence since restrictions began to ease.
Referring to the question of whether the downturn would be U-shaped – indicating a prolonged downturn – or V-shaped with a sharp bounce-back, Mr Haldane said: “It is early days, but my reading of the evidence is so far, so V.”
The remarks came as official figures showed the economy had performed even worse than initially estimated in the first quarter of the year, shrinking by 2.2% in the January-March period.
Data for April – the first full month of lockdown – shows GDP then plummeted by an unprecedented 20.4%.
But Mr Haldane said the recovery for both UK and global economies had come “sooner and faster” than the Bank of England had expected in May.
However he added that risks “remain considerable”.
“Of these risks, the most important to avoid is a repeat of the high and long duration unemployment rates of the 1980s, especially among young people,” said Mr Haldane.
The Bank of England’s latest forecast suggests that GDP will contract by 20% in the first half of the year – less than the 27% predicted last month.
However, governor Andrew Bailey warned against getting “carried away” as the Bank injected another £100bn of quantitative easing into the economy.