UK GDP could ‘fall 13%’ in 2020 as virus death toll climbs
LONDON, United Kingdom (AFP) — Britain’s economy could shrink by 13 per cent this year in the case of a three-month coronavirus lockdown, a government-funded watchdog forecasted Tuesday, as the country’s death toll passed 12,000.
The Office for Budget Responsibility (OBR) warned that the impact of the pandemic could initially be a bigger shock to the UK economy than the 2008 financial crisis and even the world wars.
“The resulting 13 per cent fall in annual GDP in 2020 would comfortably exceed any of the annual falls around the end of each world war or in the financial crisis,” the OBR said.
In the model, real GDP could fall 35 per cent in the second quarter, but bounce back quickly once the coronavirus restrictions are eased.
Unemployment could also rise by more than two million to hit 10 percent in the second quarter, with the recovery in jobs lagging behind GDP, the OBR said.
“We’re up to about 1.4 million people who have claimed Universal Credit (social security) and also other people who have claimed other things like Jobseeker’s Allowance or Employment Support Allowance,” social welfare minister Theresa Coffey told Sky News on Tuesday.
The model suggested half of those made unemployed by the crisis could return to work by the end of 2020, but that the unemployment rate at the end of 2021 could still be around 1.5 percent higher than pre-virus levels.
‘SERIOUS IMPLICATIONS’
Finance minister Rishi Sunak conceded in the government’s daily coronavirus press briefing that the crisis would have “serious implications” for the British economy and warned ministers “can’t protect every business and every household”.
However, Sunak added he was confident the UK economy could rebound “quickly and strongly”.
“While those economic impacts are significant, the OBR also expect them to be temporary with a bounce back in growth.”
Ministers have announced huge public spending measures to support businesses and those out of work, leading to a large increase in predicted borrowing.
The OBR scenario envisages a net borrowing increase of £218 billion (US$274 billion) in 2020 to 14 per cent of GDP, the largest single-year deficit since World War II.
