conomists today predicted that the government’s plan to relax Covid restrictions over Christmas could damage the economy going into 2021.
Deutsche Bank analysts said while it would be positive for GDP to relax the current tough lockdown in December, allowing families, friends and work colleagues to mix more freely for the festive season could provoke a rise in infections by the end of the year.
That would necessitate a return to tougher restrictions in the subsequent weeks which would knock the economic recovery off course again, the bank warned.
Economist Sanjay Raja wrote in a blog for clients: “While a Christmas truce around restrictions should be supportive for spending, it could also risk a jump in infections towards the end of the year raising the chances of further restrictions in the very near term.
“Indeed, this, coupled with the UK’s departure from the EU’s single market and customs union on
1 January 2021, will likely see the economy’s recovery slow down to kick off the new year.”
Raja welcomed evidence that the number of new cases had peaked, with positive test rates levelling off in England and dropping in other countries of the UK.
Most importantly, he said, the rate of transmission across the country has also fallen after having peaked at around 1.7.
Deutsche Bank said the easing in restrictions would boost GDP for December to 3%-4% month on month growth following November’s 8% decline.
Thereafter, the hit in the near term from another lockdown in the New Year could be marked.