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- The International Monetary Fund’s chief economist, Gita Gopinath, projects the UK economy will see what looks like a V-shaped recovery only to be quickly flattened out.
- The economy could see “a spike initially, and then going forward, I think we could end up with something much more flat,” Gopinath told lawmakers in Britain’s parliament on Wednesday.
- Her comments on the UK economy are in sharp contrast to projections by two policymakers at the Bank of England.
- Visit Business Insider’s homepage for more stories.
IMF’s chief economist Gita Gopinath believes Britain will see a prolonged economic recovery, as opposed to Bank of England policymakers, who forecast a so-called V-shaped recovery earlier this week.
The UK economy could see something like the beginnings of a V-shaped recovery but will quickly flatten out, Gopinath told members of parliament on the Treasury Select Committee on Wednesday.
“My fear is that the beginning of the recovery” will show “a spike initially, and then going forward, I think we could end up with something much more flat,” the economist said.
“It’s a little too early at this point to project what the rest of that path would look like.”
Gopinath told lawmakers that the government’s first priority should be to gradually scale back support programmes meant for those affected by the COVID-19 crisis, including job retention schemes.
As people begin to get back to work, the government should then focus on reallocating labour market resources or moving them into jobs where the demand is strong, she said.
The OECD predicts a 9.1% decline for the EU and 11.5% decline for the UK this year. Gopinath said that COVID-19 has an even more significant impact in low-income countries.
“The UK having negative growth of 10% is very different to a low-income country having a negative growth rate of 10%,” she told lawmakers.
The projections for poverty levels in those countries are “really sad.”
Gopinath’s comments poured cold water on the Bank of England’s projections for the economy.
The central bank’s chief economist Andy Haldane earlier this week said that the UK and global economies are recovering faster than expected.
He said that “it is early days, but my reading of the evidence is so far, so V.”
Jonathan Haskel, a member of the bank’s Monetary Policy Committee, reflected a similar sentiment on Wednesday saying that the economy shows a “glimmer of hope,” and activity has rebounded faster than anticipated.
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