The Bank of England offered a grim forecast on Thursday, saying that, as a result to the coronavirus pandemic, the British economy could suffer its deepest annual contraction since 1706.
The bank forecast the British economy will be 30% smaller at the end of the first half of the year than at the start, with the second quarter seeing a 25% slump alone following a 3% decline in the first.
The economy is expected to contract by 14% this year, which would be the biggest annual rate of decline since the Spanish War of Succession in 1706, when the economy contracted by 15%, and 1709, the year of the “Great Frost”, when the economy shrank by 13%.
Unemployment is projected to more than double to around 9%, but that figure does not include the uncertain future of the 6 million workers furloughed by firms, which are being paid by the government to cushion the economic impact of the pandemic.
The bank said the economy should start to recover during the second half of the year with the easing of the measures: “We expect the recovery of the economy to happen over time, although much more rapidly than the pullback from the global financial crisis”, said governor Andrew Bailey, adding that the bank expects there to be longer-term damage to the capacity of the economy, “but in this scenario we judge these effects to be relatively small”.
An encouraging forecast is that, the bank believes the British economy could revive quickly if the pandemic comes under control globally, and estimates that it could grow by 15% next year, which would be the biggest annual increase since 1704.
