The Bank of England has warned that the coronavirus pandemic will push the UK economy towards its deepest recession on record, the media reported on Thursday.
In a statement, the bank said the economy was on course to shrink 14 per cent this year, the biggest annual decline on record, based on the lockdown being relaxed in June, reports the BBC.
It would also be the sharpest annual contraction since 1706, according to reconstructed Bank of England data stretching back to the 18th Century.
The Bank's analysis was based on social distancing measures being gradually phased out between June and September.
The economy shrinks by 2.9 per cent in the first quarter of 2020, followed by an unprecedented 25 per cent decline in the three months to June.
This would push the UK into a technical recession, defined as two consecutive quarters of economic decline.
While UK growth is expected to rebound in 2021 to a record 15 per cent, the size of the economy is not expected to get back to its pre-virus peak until the middle of next year, the Bank said.
We have published our quarterly #MonetaryPolicyReport alongside an interim #FinancialStabilityReport. Together, they provide a scenario for the path of the UK economy in the light of Covid-19 and assess the financial system’s resilience to that scenario. https://t.co/3FIVG6rG2e pic.twitter.com/434WIhj8JX
— Bank of England (@bankofengland) May 7, 2020
Although the UK government is expected to start easing lockdown restrictions next week, the Bank has assumed that job losses and shrinking pay packets will continue to weigh on the recovery, with British families remaining cautious about shopping and socialising for at least another year, the BBC reported.
This development comes days after the UK reached the grim milestone of the maximum Covid-19 deaths in Europe, surpassing Italy's toll.
As of Thursday, the number of Covid-19 cases in the UK increased to 202,359, with 30,150 deaths.
EU forecasts 'recession of historic proportions' this year
The European Union predicted Wednesday "a recession of historic proportions this year" due to the impact of the coronavirus with a drop in output of more than 7 per cent, as it released its first official forecast of the damage the pandemic is inflicting on the bloc's economy.
The 27-nation EU economy is predicted to contract by 7.5 per cent this year, before growing by about 6 per cent in 2021.
The group of 19 nations using the euro as their currency will see a record decline of 7.75 per cent this year, and grow by 6.25 per cent in 2021, the European Commission said in its Spring economic forecast.
"Europe is experiencing an economic shock without precedent since the Great Depression," EU Economy Commissioner Paolo Gentiloni said in a statement.
April jobs data to show a record-shattering loss of jobs in US: Report
The economic catastrophe caused by the viral outbreak likely sent the US unemployment rate in April to its highest level since the Great Depression and caused a record-shattering loss of jobs.
With the economy paralyzed by business closures, the unemployment rate likely jumped to at least 16 per cent from just 4.4 per cent in March and employers cut a stunning 21 million or more jobs in April, economists have forecast, according to data provider FactSet.
If so, it would mean that nearly all the job growth in the 11 years since the Great Recession had vanished in a single month. Read full story here...