The U.K. announced Wednesday its largest peacetime borrowing level ever as the coronavirus pandemic is forecast to cause the largest plunge in economic output for 300 years.
The British economy is forecast to contract by 11.3% in 2020, according to the Office for Budget Responsibility (OBR), before growing by 5.5% in 2021, 6.6% in 2022 and 2.3%, 1.7% and 1.8% in each of the following years.
GDP (gross domestic product) is not expected to return to pre-crisis levels until the fourth quarter of 2022, and the economy will be around 3% smaller in 2025 than expected in the government’s March budget.
The OBR also forecast that borrowing is set to reach a total of £394 billion this year ($526 billion), 19% of GDP, its highest level in peacetime history, before falling to £164 billion in 2021, £105 billion in 2022/3 and remaining at around £100 billion, 4% of GDP, for the remainder of the forecast period.
Underlying debt after removing the temporary impact of the Bank of England’s asset purchase program is forecast to be 91% of GDP this year, rising steadily to 97.5% in 2025/6.
Unemployment to peak next year
The OBR has projected that unemployment will rise to a peak of 7.5%, or 2.6 million people, in the second quarter of 2021, before falling steadily to 4.4% by the end of 2024.
Reference: CNBC
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