British companies are getting Optimistic about the economic recovery, CBI predicts that by the end of 2021, output will return to pre-pandemic levels, a full year earlier than previously expected.
In the latest forecast released on Friday, business lobby groups stated that after a 9.9% drop last year, GDP this year will rebound by 8.2% and will grow by 6.1% in 2022.
If this is correct, this year’s recovery will be twice as fast as the independent financial watchdog’s Office of Budget Accountability expected in March, and it will be significantly stronger than the Bank of England’s May monetary policy forecast during the two-year period. Policy report.
The new confidence reflects the strength of the rebound that has occurred since the retail and hotel businesses began to reopen in April.
CBI economist Alpesh Paleja said that although Delayed by four weeks Removal of the remaining Covid-19 restrictions may cause a “big blow” to the affected industries, but it will have little impact on the overall economic outlook, as most companies are now operating in some form.
Paleha added that the government should consider providing targeted support to sectors that are still not fully open, under the guise of reducing commercial interest rates or providing help through local authorities.But now many companies Report difficulty in recruiting, CBI believes that there is no need to extend the vacation plan beyond September to cope with the delay in reopening.
The CBI stated that government spending on the virus will account for half of this year’s GDP growth, but consumer spending will be the “key to recovery”, driving 70% of the growth in 2022 because households have exhausted some of their savings. Established in the past year.
The CBI stated that household income should increase in real terms and predicts that the unemployment rate will peak at 5.5% in the third quarter of 2021-higher than the current 4.7% level, but earlier and smaller than previously feared.
Although this week’s data shows that the CBI is relatively optimistic about the risk of accelerated inflation Rise above the Bank of England’s 2% target Much faster than expected.
The organization predicts that consumer price inflation will be much higher than the target in the fourth quarter of 2021, but will decline steadily thereafter, with an average drop of 2% in 2022.
Paleja said that while many CBI members are warning of inflationary pressures, many of the supply restrictions should prove to be temporary-although any signs of more sustained pressure will “sound alarm bells” among monetary policymakers.
However, CBI is not so optimistic about the long-term prospects of the UK economy-even at the end of 2022, business investment will still be 5% lower than the pre-Covid level, and productivity will increase next year, but only its already weak pre-Covid path.
CBI Director-General Tony Danker said: “There are indeed positive signs of economic recovery this year and next.” “The top priority now must be to seize the opportunity to direct this investment into the main driver of the UK’s long-term prosperity. “
