Britain's economy should grow by 7.25 per cent this year, its greatest rebound since 1941, the Bank of England said on Thursday.
The UK economy suffered its worst recession in more than 300 years last year as a result of the COVID-19 pandemic and measures imposed to curb its spread.
The Bank of England said that its revised forecast — it previously estimated that the UK economy would grow by 5 per cent this year — was down to the country's fast vaccine rollout which should enable the economy to reopen quicker than initially thought.
Because it anticipates growth will occur earlier than expected, it has revised down its forecasts for next year. It now expects 5.75 per cent growth in 2022, down from a previous forecast of 7.25 per cent.
If growth returns as quickly as the central bank expects, the British economy will make up all the ground lost during the pandemic by the end of this year.
“New COVID cases in the United Kingdom have continued to fall, the vaccination programme is proceeding apace, and restrictions on economic activity are easing," Bank Governor Andrew Bailey told reporters in a conference call.
He cautioned, however, against euphoria, noting that the pandemic will leave a long-term "scarring" effect on the British economy. He also warned of "downside risks" to the economic outlook from a potential resurgence of the virus and the possibility that new variants may be resistant to the vaccine.
"Let’s not get carried away," Bailey said. "It still means that two years of output growth have been lost to date."
If pre-pandemic trends persisted, that would equate to around 3 per cent of output lost during the pandemic.
The nine-member Monetary Policy Committee said it will maintain the bank's main interest rate at 0.1 per cent — the lowest level in the bank's 327-year history.
The UK is Europe's worst impacted country with more than 127,500 COVID deaths.
Its vaccine rollout however is among the fastest in the world. As of Thursday, more than half of the British population has received at least one dose of the vaccine and about a quarter is fully inoculated.