Tight borders after the distribution of coronavirus vaccines will likely have a negative impact on economic recovery in the U.K., Ben Broadbent, deputy governor for monetary policy at the Bank of England (BOE), told CNBC on Friday (Feb. 5).
“One of the downside risks we flagged is the possible emergence of new variants that are less susceptible to the vaccines. We haven’t examined precisely the effects of the different sorts of restrictions,” Broadbent said, per CNBC.
“My instinct would be that if you close borders, that would be negative for both the demand and the supply side of the economy,” he added.
The U.K. government said travelers coming into the area from 33 “red-list” countries would be mandated to quarantine in hotels as of Feb. 15. Broadbent said the discovery of new variants of COVID-19 in recent months was part of the reason for the BOE’s new measures.
“That is one of the reasons why as I say, one shouldn’t be too misled by the strength of the growth rate of spending and GDP (gross domestic product) in this forecast, and it is why the level of both of those things is actually below our expectations and new forecasts for the second half of this year than they were three months ago,” Broadbent said, per CNBC.
The BOE lowered its 2021 GDP growth forecast to 5 percent from 7.25 percent. As the U.K. continues to lockdown, a 4 percent decline is anticipated for the first quarter.
By mid-February, the U.K.’s vaccination program is tracking to vaccinate some 15 million people in its top four priority groups — health workers, the elderly, the over-70 population and anyone deemed vulnerable.
“One of the things we have seen throughout this episode is a fair bit of substitution away from things that do expose people to infection risk but towards things that do not,” Broadbent said, per CNBC.
“Finally I should say that the evidence from last summer was, not just in the U.K. but throughout the world and particularly that part of the world that endured lockdowns, that spending does come back pretty quickly once you remove those caps, at least initially.”
January data showed that the Eurozone was slipping into another recession due to the resurgence of the coronavirus. The European Council decided on Jan. 21 to keep borders open to aid in the distribution of goods and services.
The European Commission said in a report last month that it was working on a plan to speed up vaccinations and testing to help end the pandemic. The target is to get 80 percent of healthcare workers and those over 80 years old vaccinated by March.