BOE’s Rebound Hopes Called Into Question by Top Researcher

(Bloomberg) -- The U.K. economy will remain below its pre-Covid levels until the end of 2023, an influential think tank said, giving a much more pessimistic view than the Bank of England did last week.

The National Institute of Economic and Social Research cut its forecast for growth this year to 3.4% from 5.9% in October. That follows a 10% slump in 2020. The BOE predicts that gross domestic product will return to pre-crisis levels in the first quarter of next year.

Pressure is mounting on the government to extend support programs that are currently set to wind down next month. Niesr said fiscal stimulus was “money well spent” and a premature end risks delaying the rebound. It sees unemployment climbing to 7.5%, or 2.5 million people, by the end of 2021, while inflation stays subdued at 1.3%.

The forecasts reflect high levels of uncertainty about the path of the virus and the efficacy of vaccines against variants, said Hande Kucuk, deputy director at Niesr. She added that the time frame for regaining lost output is consistent with the last big recession.

So far the U.K. has given first shots to more than 12 million people, putting it ahead of almost every other country in the world on immunizations. It has also suffered one of the worst death tolls.

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