Coronavirus: UK economy should shrink by a record 35% in June

Britain’s independent tax and spending watchdog warned that the coronavirus pandemic could cause the UK economy to shrink by a record 35% in June.

The Office of Budgetary Responsibility said this was based on the assumption that the current blockade would last three months.

Once the restrictions were lifted, the OBR said it did not expect lasting damage.

Separately, the International Monetary Fund warned that the virus would push the UK into its deepest depression for a century.

The IMF expects the UK economy to shrink 6.5% in 2020, while the world economy will contract 3%.

He said the pandemic had plunged the world into a “crisis like no other.”

The OBR forecast, which focuses only on the impact of the virus on the UK economy and public finances, is more severe.

He said that a three-month blockade followed by three months of partial restrictions would raise Britain’s loan bill to an estimated £ 273 billion this financial year, or 14% of gross domestic product (GDP).

This would represent the largest deficit as a percentage of GDP since World War II.

While loans are expected to increase, the OBR said the government’s unprecedented financial aid to workers and businesses would help limit any long-term damage.

Half of the sharp decline in economic growth in the second quarter is expected to reverse in the three months through September.

While the UK economy is expected to contract by 13% year-round, the UK is expected to return to its pre-crisis growth trend by the end of 2020.

The OBR expects a longer lasting impact on unemployment, which is estimated to increase by 2.1 million to 3.4 million by the end of June.

Under this scenario, unemployment would reach 10%, from its current rate of 3.9%, before falling to around 7.3% at the end of the year.

The unemployment rate is expected to remain high until 2023, when it is expected to drop back to 4%, in line with the March OBR forecast.

Lasting impact on public finances.

The OBR expects UK debt to remain high for years to come, and additional loans are expected to increase Britain’s debt share to more than 100% of GDP this financial year.

While this will drop sharply as the UK economy recovers, public debt is expected to remain at 84.9% of GDP over four years, far more than the 75.3% forecast in the March budget.

However, the OBR said additional Treasury spending to support the economy was crucial in limiting economic damage.

“The government’s policy response will have substantial direct budget costs, but the measures should help limit long-term damage to the economy and public finances; the costs of inaction would certainly have been higher.”

He added that while the blockade was the main restriction on economic activity, relaxing these measures too soon would cause more damage.

“The reason most of the short-term economic impact comes from these measures is that they are successful in limiting the spread of the disease.

“If the measures weren’t strict enough to control the disease, then the economic impact of the disease would be much greater.”