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Covid-19 pandemic impacting UK’s economic growth prospects in the 2020s – leading macroeconomic influencers

30 Mar 2021 (Last Updated March 30th, 2021 08:43)

Economists believe the coronavirus pandemic has put pressure on the longer-term growth prospects of the UK and other western economies.

Covid-19 pandemic impacting UK’s economic growth prospects in the 2020s – leading macroeconomic influencers
Credit: jax10289, Shutterstock.com.

Economists believe the coronavirus pandemic has blurred the longer-term growth prospects of the UK and other western economies.

Andrew Sentance

Andrew Sentance, a business economist, shared an article on how the Covid-19 pandemic has put downward pressure on the already weakening economic growth in the UK and G7 countries. According to a forecast from the National Institute of Economic and Social Research (NIESR), the UK is unlikely to recover to pre-pandemic levels until 2023 and 2024 despite positive forecasts from the Bank of England.

The longer-term annual GDP growth trend has slowed down over the decades, with the highest annual GDP growth of 3.4% observed in the 1960s, which has been rolling down since then reaching 1.4% in 2020s. The pattern is not confined to the UK and is prevalent across the G7 economies.

Over the decades, several factors have been responsible for the disappointing economic growth in the UK and other western economies, ranging from more investment in technology, inclination towards a services-oriented economy, the 2007-2009 financial crisis, to Brexit. Although green technologies and low carbon economy seem to be promising to push the economies upward, there is a negative influence from other factors such as the US-China trade conflict, the article added.

Kevin P. Gallagher

Kevin P. Gallagher, a professor and director of Global Development Policy Center at Boston University, reiterated Antonio Guterres’ warning against the forthcoming issue of debt sustainability for developing economies due to the Covid-19 pandemic.

Antonio Guterres, secretary-general of the United Nations, noted that large and middle-income countries such as Brazil and South Africa are borrowing heavily from domestic lenders at very high interest rates rather than foreign investors.

The borrowing from the internal market is sharply shortening the maturities, creating a burden on the borrowers to repay quickly amid the pandemic crisis, failing which can lead to catastrophic consequences such social unrest and instability.

Guterres believes the process is creating delusional debt sustainability, which needs to be addressed at the earliest in the wake of slower economic recovery due to slower vaccination. The plausible ways to which this can be achieved include new allocation of special drawing rights to channel funds to vulnerable middle-income countries, debt service suspension as a temporary relief measure from debt repayment, and lending at a higher concession through multilateral development banks.

Jacob F Kirkegaard

Jacob F Kirkegaard, a senior fellow at the Peterson Institute for International Economics and German Marshall Fund, shared an article revealing how Russia’s vaccine geopolitics may fail its cause, as the country still relies upon imported vaccines for its Covid-19 inoculation programme.

Russia is exporting its domestic Sputnik V vaccine to needy countries, but the country itself is facing a slower rollout of vaccine at home and depends on cross-border trade to satisfy its vaccine supplies. The country is making up for the gap through overseas manufacturing and has made a few production deals with India and South Korea.

Russian President Vladimir Putin stated that sufficient number of Sputnik V vaccine doses have been distributed to inoculate 8.9 million people across the country, since August 2020. Vaccine imports are expected to ramp up in the coming weeks helping the country overcome its vaccination rollout, which is lagging behind its counterparts. The role of imports in reducing the vaccine shortage in the country, however, remains unclear, the article noted.