The Bank of England cut its forecast for UK economic growth in 2021 on Thursday, saying the sharp rise in coronavirus cases in the winter and new country-wide restrictions in January have delayed the recovery.
However, the UK’s central bank said coronavirus vaccines had improved the outlook further out, with the economy now expected to grow faster in 2022.
The BoE left interest rates at their record-low level of 0.1%, and held its bond-buying package steady at £895 billion ($1.22 trillion).
In its latest quarterly report into the health of the UK economy, the BoE predicted gross domestic product would now grow 5% in 2021 compared to its November estimate of 7.25%.
The pound was down 0.12% to $1.363, while the UK’s FTSE 100 stock index was 0.37% lower.
The Bank’s monetary policy committee said in the report that restrictions put in place in January meant “GDP is expected to fall by around 4% in 2021 Q1, in contrast to expectations of a rise in the November Report.”
Yet it added: “GDP is projected to recover rapidly towards pre-Covid levels over 2021, as the vaccination programme is assumed to lead to an easing of Covid-related restrictions and people’s health concerns.”
The UK economy is now expected to grow 7.25% in 2022, compared to the November prediction of 6.25%.
More than 100,000 people have now died from coronavirus in the UK, giving the country one of the worst death rates in the world.
Its economy has been hit particularly badly, with the International Monetary Fund last month saying the UK had suffered the deepest recession out of the G7 group of rich countries.
Both the IMF and the Bank of England now put the 2020 contraction at 10%. That would be the worst in around 300 years, although official figures have not yet been released.
However, the UK has been one of the fastest at distributing coronavirus vaccines. More than 10 million people have already received their first jab.
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