RISHI Sunak has warned of more "tough times" ahead as he made clear the UK Government would not be able to protect every business and every household during the coronavirus pandemic.
Analysis of the potential economic impact of the lockdown by Britain's fiscal watchdog suggested the UK economy could fall off a cliff edge during the second quarter, potentially shrinking 35 per cent between April and June while unemployment surged by more than two million.
The Office for Budget Responsibility[OBR] said for the year as a whole GDP could fall by 13 per cent, which would mean the immediate effect on living standards would be worse than that of the 2008 financial crash.
In its first estimate of the economic toll taken by the crisis, the OBR said unemployment could hit 3.4m, leaving around one in 10 of the working population without a job. It described the possible scenario as the “largest single-year deficit since the Second World War”.
Addressing the report - which the Chancellor said was a scenario-based analysis and not a specific forecast – he told the daily Downing Street press conference that had the Government not taken the actions it had, "the situation would be much worse".
Mr Sunak declared: "These are tough times and there will be more to come. As I have said before, we cannot protect every business and every household.
"But we came into this crisis with a fundamentally sound economy, powered by the hard work and ingenuity of the British people and British businesses.
"So, while those economic impacts are significant, the OBR also expects them to be temporary, with a bounce-back in growth."
The OBR based the outlook on a scenario where the lockdown lasts three months followed by a partial lifting for three months.
But the independent forecaster said, in this case, there would be a sharp bounce-back in the economy, with gross domestic product likely to jump 25 per cent in the third quarter and a further 20 per cent in the final three months of 2020.
The analysis came as the latest UK figures showed a rise in hospital deaths by 778 to 12,174, including 40 in Scotland, with confirmed cases nearing 94,000.
The Chancellor said the figures were a “powerful reminder to us all of the importance of following the Government’s guidance; stay at home, protect the NHS and save lives”.
Meanwhile, the International Monetary Fund painted a global picture of the effects of the pandemic and suggested the world was facing the worst downturn since the Great Depression of the 1930s.
It released numbers that showed a global slowdown this year of three per cent but with other leading economies faring worse: the eurozone down by 7.5 per cent; the UK by 6.5 per cent and the US by 5.9 per cent.
Referring to the “Great Lockdown,” the IMF said the sudden shock caused by the spread of the coronavirus meant it had scrapped its global growth estimate of 3.3 per cent growth of just three months ago and replaced it with an estimate of a 3.0 per cent contraction.
Gita Gopinath, the global watchdog’s chief economic adviser, said: “It is very likely this year the global economy will experience its worst recession since the Great Depression, surpassing that seen during the global financial crisis a decade ago. ‘The Great Lockdown’, as one might call it, is projected to shrink global growth dramatically.”
The IMF predicted the world economy would partially recover next year with an estimated growth rate of 5.6 per cent but Ms Gopinath pointed out the level of GDP would remain below the pre-virus trend and that there was considerable uncertainty about how strong the economy would bounce back.
“Much worse growth outcomes are possible and maybe even likely,” she added.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereLast Updated:
Report this comment Cancel