Jumana Saleheen's picture
Affiliation: 
CRU Group
Credentials: 
Chief Economist

Voting history

Will COVID-19 Cause Permanent Damage to the UK Economy?

Question 1: How quickly will the economy rebound (e.g. to the pre-pandemic trend) once the COVID-19 pandemic has been contained and absent major policy interventions? 

Answer:
The economy will recover within a small number (1-5) of years
Confidence level:
Extremely confident
Comment:
I expect Covid-19 to give rise to a deep recession in the UK in 2020. GDP growth is likely to fall by 8-10% in 2020. Assuming the virus is contained by then, 2021 will be a year of sharp rebound. GDP growth is forecast to rise by 8-10% y/y. The large rebound needs to be understood in the context of a recovery from the very low levels of activity witnessed during lockdown. The UK will continue its recovery through 2022. By 2023 I expect the UK economy to return to its pre-crisis growth rate of 1.6% y/y. It is important to note that while the growth rate of the UK returns to its pre-pandemic trend, the level of activity does not. I expect the UK to endure a small permanent loss in the level of GDP. Put differently in 3 years’ time the UK will be 2% smaller than it otherwise would have been, absent Covid. That is what I define the UK recovery as U-shaped. It would be V-shaped only if all losses from Covid could be recovered later, such that there would be no permanent loss in the size of the economy.

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