Boris Johnson says UK economy is ‘bouncing back’
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Julian Jessop took to Twitter after the Office For National Statistics published its latest economic statistics, relating to November 2021, which reveals GDP rose 0.9 percent, while the economy was 0.7 percent larger than in February 2020. Mr Jessop, who used the data to update his UK GDP forecasts, posted: “UK economic growth in 2021 is likely to be just shy of 7.5 percent, one percent higher than assumed in the October Budget and three percent higher than the consensus at the start of last year.
“This means that the UK was almost certainly the fastest-growing G7 economy in 2021.”
Many were likely to dismiss this as an inevitable minor recovery after the large fall in 2020, Mr Jessop, the former Chief Economist at the Institute for Economic Affairs (IEA), conceded.
However he added: “The UK still did much better than expected, even taking account of this favourable base effect.”
To illustrate his point, Mr Jessop share a chart comparing what he called “two different vintages” of the Organisation for Economic Cooperation and Development’s forecasts for last year.
He said: “In December 2020 the OECD expected the UK to grow by 4.2 percent in 2021, and to be outpaced by France and Italy.
“This turned out to be the biggest forecast error for any G7 economy.
“As a result, UK GDP has returned to its pre-Covid level much sooner than most (not all) had anticipated.”
Most economists surveyed by the Financial Times in December 2020 had not anticipated such a level to be regained until the third quarter of this year, Mr Jessop said.
He added: “This is a significant milestone, given the relatively large fall in UK GDP in 2020.
“Of course, it would be wrong to say GDP has ‘fully recovered’.
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“The economy is still much smaller than if it had continued to grow at its pre-Covid trend, and parts are still on life support.
“But the UK recovery also ended 2021 with more positive momentum than many of its peers, with GDP rising about one percent in Q4.
“So while UK GDP regained its pre-Covid level a little later than some (notably the US and France), it has a better chance of pushing on from here.”
The first full-year estimates for 2021, which were also published on Friday, also suggested Germany was now the “G7 laggard”, Mr Jessop said.
He explained: “German GDP fell by 0.5 percent to 1.0% q/q in Q4 and is still below its pre-Covid level, due to supply chain problems, soaring #inflation, and Omicron restriction.”
Looking ahead to the rest of 2022, Mr Jessop expects UK GDP to risk by between 5.5 and six percent.
He said: “The recovery probably stalled again in December and January, due to caution over #Omicron, and rising energy bills and tax hikes will add to the headwinds in 2022.
“But there should be some powerful tailwinds too, including the strong #jobs market, a further easing of #Brexit uncertainty, a rebound in business #investment, and the fading threat from Covid.
“The more timely business and consumer surveys are generally reassuring too.”
He concluded: “The UK economy should again beat expectations this year.
Obviously, there are big risks (in both directions), and the government may need to do more to help low-income households in particular.
“But the consensus still looks too pessimistic, just as it was in 2021.”
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