The UK economy will enjoy its fastest growth in more than 70 years in 2021 as Covid-19 restrictions are lifted, according to the Bank of England.
The economy is expected to expand by 7.25% this year, with extra government spending helping to limit job losses.
However, it follows a contraction of 9.9% in 2020, the biggest in 300 years.
Andrew Bailey, the governor of the Bank of England, said the recovery was “strong” but likened it to “more of a bounce back” than a boom.
He added that the surge in growth, while “good news”, would only return the UK economy back to its 2019 size.
Mr Bailey told the BBC: “We’re going to see a continued strong recovery this year, but let’s put that into perspective.
“That’s two years passed with no growth in the economy.”
His comments came as Bank policymakers held interest rates at a record low of 0.1%.
The Bank expects the recovery to gather pace as the reopening of high streets paves the way for a mini-spending boom.
The UK’s rapid vaccine rollout is also expected to boost consumer confidence.
Growth of more than 7% this year would represent the strongest expansion since official records began in 1949.
Fewer job losses
Chancellor Rishi Sunak announced in the March Budget that the furlough scheme, which subsidises employees’ wages, would be extended until the end of September.
Mr Bailey said the extension would limit the rise in unemployment “significantly” by providing a “bridge of support that will last until the recovery is underway”.
The Bank now expects the unemployment rate to peak at 5.5% later this year. This is far below the 7.75% it predicted in February.
Mr Bailey added: “Longer term unemployment is one of the most difficult things to deal with. And we think that will be substantially reduced.”
The number of people on furlough is expected to fall to 2.75 million in the three months to June, from just under five million at the start of this year.
“Given the expected near‑term recovery in activity, unemployment is projected to increase only slightly,” policymakers said in the Bank’s latest Monetary Policy Report. (BBC)