expected to cool down
Great Britain with historical GDP plus
02/11/2022, 10:19 am
Despite the omicron wave with hundreds of thousands of new infections in December alone, the economy in Great Britain is growing at its fastest pace in 80 years. However, economists expect that inflation, high energy prices and new taxes will now also slow down the upturn on the island to its previous extent.
Despite corona waves and high inflation, the British economy grew more strongly in 2021 than at any time since the Second World War. The gross domestic product of the fifth largest economy in the world increased by 7.5 percent, according to the ONS statistics office in London. That’s the strongest gain since 1941, with Britain outperforming the other major industrial nations. In the first year of the 2020 pandemic, there was still a slump of 9.4 percent. For comparison: the German economy grew by 2.8 percent last year after crashing by 4.6 percent in 2020 due to the Corona crisis.
Growth in the fourth quarter helped the UK rebound. Despite the omicron wave in December with hundreds of thousands of new infections, there was an increase in gross domestic product of 1.0 percent compared to the previous quarter, as in the summer. Economic output was thus only 0.4 percent below the pre-crisis level of the end of 2019.
The International Monetary Fund (IMF) expects growth of 4.7 percent this year, followed by an increase of 2.3 percent in 2023. “The UK economy faces a much weaker 2022 as the crippling burden of rising inflation, expensive energy bills and higher taxes for consumers and businesses dampen activity,” said Suren Thiru of the UK Chamber of Commerce.
In December, the Bank of England was also the first of the major central banks to raise interest rates since the beginning of the pandemic due to the good economy – and followed up with a second step at the beginning of the year, which means that the key monetary policy rate is now 0.5 percent. It is reacting to the rapid rise in prices on the island. Economists assume that the inflation rate could rise above the seven percent mark in the coming months and thus exceed the central bank’s target of 2.0 percent. The prices are being driven, among other things, by the sharp rise in energy costs and the shortage of materials and supply bottlenecks resulting from the pandemic crisis.
The UK’s exit from the EU has meanwhile clearly slowed down German-British foreign trade. German exports to the UK fell 2.6 percent last year, while growing 14 percent overall to a record €1,375.5 billion, according to the Federal Statistical Office. British exports to Germany even fell by 8.5 percent in 2021, while German imports increased by a total of 7.1 percent.