The UK’s gross domestic product (GDP) may return to pre-pandemic levels as soon as next summer, according to economists, after hopes were raised following news this week that Pfizer’s coronavirus vaccine proved ninety per cent effective in phase three clinical trials.
Should a viable vaccine be made available around the end of the year, life would begin to return to normal faster than many forecasters had dared to predict. Those that produced a range of scenarios said that their “upside” predictions now appeared more likely.
Douglas McWilliams, chairman of the Centre for Economics and Business Research, said that GDP growth next year “might be double-digit or close to that” and may have recovered all the lost ground since March possibly “as early as mid-2021”.
Simon French, UK economist at Panmure Gordon, said: “This would bring forward the period for return to pre-Covid levels of output to the first half of 2022, from the first half of 2023.”
Oxford Economics is forecasting growth of 5.4 per cent next year in its “baseline” scenario, but 8.9 per cent in its “upside” one. Andrew Goodwin, UK economist at the consultancy, said that the vaccine “changes the skew of the risk profile, placing a higher probability on our upside scenario”.
Capital Economics said that unemployment was likely to peak “at 7 per cent next year instead of 9 per cent” and that GDP may “rise to its pre-virus level a year earlier than otherwise … early in 2022 rather than 2023”.
Last week the Bank of England downgraded its 2020 forecast from a contraction of 9.5 per cent to a contraction of 11 per cent and for the recovery next year to be slower than previously expected, with growth of 7.25 per cent as opposed to 9 per cent. It expected the lost ground since March to have been recovered by early 2022.
The Bank did not base its forecasts on a vaccine being discovered so soon. George Buckley, UK economist at Nomura, said: “It’s certainly very encouraging news so could present upside risks to our view. The vaccine means there’s now a greater chance of a ‘step adjustment’.”
A viable vaccine increases the possibility of life returning to normal, encouraging people back into the shops and on to aircraft. Michael O’Leary, chief executive of Ryanair, the low-cost airline, said that it was the “first bit of sunshine we’ve had for the past 12 months”.
He forecast a return to 75 per cent to 80 per cent of pre-crisis traffic by next summer, a marked increase over the 50 per cent to 80 per cent range he had given a week earlier.
“There’s reasonable optimism now that summer 2021 will get back to some degree of normality,” he told an online conference, the day after Pfizer broke the news that its experimental vaccine had been 90 per cent effective in trials.
