Coronavirus: UK to see 'worst' economic contraction among developed countries
The OECD said economic recovery remains highly uncertain as most countries are vulnerable to a second wave of COVID-19 infections
Wednesday 10 June 2020 21:08, UK
The UK will experience the worst economic contraction among developed countries due to the coronavirus pandemic, according to a new forecast.
The Organisation for Economic Co-operation and Development (OECD) predicts the British economy will shrink by 11.5% in 2020 due to the lockdown imposed since the first wave of the coronavirus pandemic.
France is expected to see its annual GDP contract by 11.4%, and a fall of 11.3% is projected for Italy.
The OECD said the health crisis is "without precedent in living memory" and has led to the "most severe economic recession" in nearly a century.
Chancellor Rishi Sunak said the UK economy was experiencing difficulties similar to other countries around the world.
He said: "I've been clear that our top priority has always been to support people, jobs and businesses through this crisis - and this is what we've done.
"The unprecedented action we've taken to provide lifelines that help people and businesses through the economic disruption will ensure our economic recovery is as strong and as swift as possible."
Globally, economic activity would fall by 6% this year while unemployment would rise by 9.6% compared with 5.4% in 2019.
It predicted a 7.3% contraction in GDP for the US, the world's largest economy, under a best case scenario.
The country's central bank, the Federal Reserve, later forecast a 6.5% hit as it outlined no changes to its policy response to the crisis.
However, its committee saw interest rates remaining at their current crisis level until the end of 2022.
The OECD report said economic recovery remains highly uncertain as most countries are vulnerable to another spike in COVID-19 infections.
If there is a second wave of infections, the UK could face an even deeper contraction of 14%. However, that scenario will see Spain, France and Italy's GDP fare marginally worse.
The "double-hit scenario" would see unemployment in the UK rise to 10% and remain at that level throughout the next year, despite the use of the government's furlough scheme.
The chancellor said the government was meeting its self-imposed five tests to reopen the economy, despite concerns from scientists about the resurgence of the disease.
Mr Sunak urged shoppers to return to the high street when general shops begin opening up in the coming weeks. The longer the economy was shut down for, the worse the implications, he said.
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The latest data from the Treasury showed 8.9 million workers had been furloughed until the week to 7 June, and the Job Retention Scheme has cost taxpayers £19.6bn since its introduction in March.
The OECD also made recommended the UK government to delay the end of the transition period with the EU.
It added: "Given the economic disruption caused by COVID-19, a temporary extension of existing trading relationships with the EU beyond the end of 2020 would help reduce uncertainty."