Bailey: No Recovery Like It In Modern Era

Q: Do you have any good historical comparisons for what we are going through now in relation to the growth forecast?

• A (Bailey): I don't think we have had a bounce back like this in modern times.

Q: What do you think is different about this recession from the previous one? It looks like this one will be much less severe with much less scarring.

• A (Bailey): Recessions that are linked to financial crises do tend to have a longer lasting impact. This time around we have not had a financial crisis. The post GFC reforms have withstood the test of the pandemic.
• A: This is not anything like a conventional economic cycle. Two differences. First, the rapid dynamics of the pandemic itself in both directions which gives rise to the violent moves in economic activity. Second, when you get downswings from a pandemic they are not propagated in the same way since the furlough scheme has interrupted the normal feedback loop between income and spending. The level of GDP remains below where we were forecasting it to be prior to the pandemic.