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Britain's economy to reach pre-COVID-19 levels within two years: Reuters poll – TheChronicleHerald.ca

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By Jonathan Cable

LONDON (Reuters) – Britain’s economy will narrowly dodge a double-dip recession and will have returned to pre-COVID-19 levels within two years, according to economists in a Reuters poll who said the Bank of England was unlikely to take borrowing costs negative.

The country has suffered the highest coronavirus-related death toll in Europe and the government has reimposed strict lockdown measures to try and stop the virus spreading, dealing a hammer blow to its dominant service industry.

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Gross domestic product was forecast to contract 3.0% this quarter, the Feb. 8-11 poll of around 70 economists found, more than double the 1.4% fall predicted last month. Conversely, the median for Q4 was revised up to 0.4% growth from a 2.0% contraction previously.

But Britain is among the leading countries in rolling out vaccines to its population and GDP was expected to grow 4.7% in the second quarter as some restrictions are likely to be lifted. In Q3 and Q4 it will expand 2.7% and 1.5% respectively.

“The UK’s success in vaccinating high-risk groups and the sharp fall in COVID-19 cases suggests the government will on Feb. 22 be able to set out plans for schools to reopen… followed by non-essential retailers in the second half of March and the consumer services sector in the second half of April,” said Samuel Tombs at Pantheon Macroeconomics.

For 2021 as a whole the growth forecast was revised down to 4.7% from 4.9% while the 2022 median was revised up to 5.5% from 5.3%.

When asked how long it would take for the economy to reach pre-COVID-19 levels 18 said within two years from now. One said within a year and nine said would take over two years. Last month 14 of 23 said it would take over two years.

Reuters Poll – UK economy outlook – Feb 2021 https://fingfx.thomsonreuters.com/gfx/polling/qmypmwoexpr/Reuters%20Poll%20-%20UK%20economy%20outlook%20-%20Feb%202021.PNG

Britain also faces the added headache of Brexit and just under half of British companies that export goods have run into difficulties caused by the shift in trade terms with the European Union since the start of the year, a survey showed on Thursday.

Trade analysts think some of the extra cost and bureaucracy will be permanent, and the Bank of England has forecast they will lower trade by 10% in the long run compared with a frictionless arrangement.

HOLDING ABOVE WATER

Last year the BoE slashed Bank Rate to 0.1% and restarted its bond buying programme to offer support to the economy. Medians in the poll suggest there will be no unwinding of that ultra-loose monetary policy until 2024 at the earliest.

There had been talk the Bank would take borrowing costs negative – and markets had been pricing it in – but 30 of 34 economists who responded to an extra question said it was unlikely or very unlikely. Only four said it was likely.

“An economic recovery from spring onwards and a continued rise in inflation towards the BoE’s 2% target over the course of 2021 will likely put to bed any remaining expectation that the Bank Rate could fall further,” said Kallum Pickering at Berenberg.

(For other stories from the Reuters global economic poll:)

(Reporting by Jonathan Cable; Polling by Sujith Pai and Mumal Rathore; Editing by Toby Chopra)

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Economy

China Wants Everyone to Trade In Their Old Cars, Fridges to Help Save Its Economy

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China’s world-beating electric vehicle industry, at the heart of growing trade tensions with the US and Europe, is set to receive a big boost from the government’s latest effort to accelerate growth.

That’s one takeaway from what Beijing has revealed about its plan for incentives that will encourage Chinese businesses and households to adopt cleaner technologies. It’s widely expected to be one of this year’s main stimulus programs, though question-marks remain — including how much the government will spend.

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German Business Outlook Hits One-Year High as Economy Heals

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German business sentiment improved to its highest level in a year — reinforcing recent signs that Europe’s largest economy is exiting two years of struggles.

An expectations gauge by the Ifo institute rose to 89.9. in April from a revised 87.7 the previous month. That exceeds the 88.9 median forecast in a Bloomberg survey. A measure of current conditions also advanced.

“Sentiment has improved at companies in Germany,” Ifo President Clemens Fuest said. “Companies were more satisfied with their current business. Their expectations also brightened. The economy is stabilizing, especially thanks to service providers.”

A stronger global economy and the prospect of looser monetary policy in the euro zone are helping drag Germany out of the malaise that set in following Russia’s attack on Ukraine. European Central Bank President Christine Lagarde said last week that the country may have “turned the corner,” while Chancellor Olaf Scholz has also expressed optimism, citing record employment and retreating inflation.

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There’s been a particular shift in the data in recent weeks, with the Bundesbank now estimating that output rose in the first quarter, having only a month ago foreseen a contraction that would have ushered in a first recession since the pandemic.

Even so, the start of the year “didn’t go great,” according to Fuest.

“What we’re seeing at the moment confirms the forecasts, which are saying that growth will be weak in Germany, but at least it won’t be negative,” he told Bloomberg Television. “So this is the stabilization we expected. It’s not a complete recovery. But at least it’s a start.”

Monthly purchasing managers’ surveys for April brought more cheer this week as Germany returned to expansion for the first time since June 2023. Weak spots remain, however — notably in industry, which is still mired in a slump that’s being offset by a surge in services activity.

“We see an improving worldwide economy,” Fuest said. “But this doesn’t seem to reach German manufacturing, which is puzzling in a way.”

Germany, which was the only Group of Seven economy to shrink last year and has been weighing on the wider region, helped private-sector output in the 20-nation euro area strengthen this month, S&P Global said.

–With assistance from Joel Rinneby, Kristian Siedenburg and Francine Lacqua.

(Updates with more comments from Fuest starting in sixth paragraph.)

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Parallel economy: How Russia is defying the West’s boycott

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When Moscow resident Zoya, 62, was planning a trip to Italy to visit her daughter last August, she saw the perfect opportunity to buy the Apple Watch she had long dreamed of owning.

Officially, Apple does not sell its products in Russia.

The California-based tech giant was one of the first companies to announce it would exit the country in response to Russian President Vladimir Putin’s full-scale invasion of Ukraine on February 24, 2022.

But the week before her trip, Zoya made a surprise discovery while browsing Yandex.Market, one of several Russian answers to Amazon, where she regularly shops.

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Not only was the Apple Watch available for sale on the website, it was cheaper than in Italy.

Zoya bought the watch without a moment’s delay.

The serial code on the watch that was delivered to her home confirmed that it was manufactured by Apple in 2022 and intended for sale in the United States.

“In the store, they explained to me that these are genuine Apple products entering Russia through parallel imports,” Zoya, who asked to be only referred to by her first name, told Al Jazeera.

“I thought it was much easier to buy online than searching for a store in an unfamiliar country.”

Nearly 1,400 companies, including many of the most internationally recognisable brands, have since February 2022 announced that they would cease or dial back their operations in Russia in protest of Moscow’s military aggression against Ukraine.

But two years after the invasion, many of these companies’ products are still widely sold in Russia, in many cases in violation of Western-led sanctions, a months-long investigation by Al Jazeera has found.

Aided by the Russian government’s legalisation of parallel imports, Russian businesses have established a network of alternative supply chains to import restricted goods through third countries.

The companies that make the products have been either unwilling or unable to clamp down on these unofficial distribution networks.

 

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