UK economy will outpace the rest of G7 and cast off omicron’s shadow

The UK’s economy will outpace all other nations in the G7 in 2022, for the second year in a row. It is roaring back after a deep recession than many of its rivals and is poised to surpass every other country in the G7.

One factor contributing to the high growth forecast is the UK’s fast booster vaccine program.

Goldman Sachs economists predict that the UK will see a 4.8% growth in the next 12 months. This is well above the 3.5 per cent predicted for the US, 4pc forecast for Germany, and 4.4pc each for France and Italy. Canada’s and Japan’s GDP are also expected to grow much slower.

HSBC predicts that the British GDP will rise by 4.7 per cent in 2022. The forecasts for the rest of G7 are between 2.2pc and 4.3pc for Japan, respectively.

In 2021, the UK saw an increase in output of almost 7 per cent. This was after it recovered from a deep Covid recession that saw GDP shrink by nearly 10 per cent in 2020.

In the next year, the IMF expects Britain will outgrow other members of the G7 club.

Martin Beck, EY Item Club’s senior economic advisor, stated that the recovery is dependent on strong consumer demand. Although they have shown a willingness to purchase more goods during the pandemic, their confidence may be shaken by this new variant.

He said that the economy will continue to recover if the activity is supported by “very solid household finances from savings and paying down debt, as well as higher house prices and traditional British consumer appetite for spending.”

The UK’s GDP dropped further than other countries in the pandemic because official statistics there are more accurate in estimating the output of public services than the money spent on them. This means that other countries often underestimate the extent of the downturn.

Mr Beck stated that “Measurement and evaluation of the output of the public sector cast the UK in an adverse light during lockdowns, however, it will be a plus once things get back on track.”

Pantheon Macroeconomics’ Claus Vistesen – who has downgraded its UK forecast from 4.2pc to 3.8pc, and the eurozone forecast to 3.8pc because of the omicron epidemic – stated that Britain’s faster growth could be due to the fact that there is more ground for recovery than expected given the depth of the 2020 recession.

He also said that the Eurozone is also at risk of being held back by Covid, as the currency region was already facing a new pandemic wave even before this latest version.

He stated that the eurozone economy will be more affected by omicron as there were already restrictions in Europe because of the delta wave in the fourth quarter.

“So, I would guess that the total impact on output will be greater in the eurozone than the UK.”

The UK also has the advantage of a quicker vaccine booster program, which could help reduce some of the severe lockdown restrictions.

The rollout of booster programs takes time. “The UK is moving very quickly, just like it was early in the pandemic, but it is still facing down restrictions,” stated Mr Vistesen.

“I don’t think it will be much different in Europe – even as Europe boosts boosters, which is true, it won’t stop restrictions being imposed in the near term.”

Both economies are affected by high energy costs and global supply chain issues. However, some of these problems are more severe in the eurozone, such as the double-dip recession in Germany’s vital car factories.

Vistesen believes that the UK and the eurozone economies will both continue to be on sound financial footings, despite the threat of further lockdowns.

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