Just days after the Office for Budget Responsibility announced its economic forecasts in March, the reality of Covid-19’s impact on the UK economy sunk in, and its projection was rendered completely obsolete. A month later, with a clearer picture of the toll the virus and lockdown have taken, the OBR today released its new coronavirus analysis, showing a staggering 35 per fall in real GDP in the second quarter, and an unemployment spike of up to 10 per cent – that is, 2 million additional people out of work. A long way off its Budget 2020 forecast for the year:
As the graph above shows, the OBR’s scenario predicts a ‘V-shaped’ recovery – a quick economic downturn followed by a quick upturn once the lockdown measures are lifted – but it is not predicting a recovery in full. The start of a GDP uptick in Q3, followed by ‘pre-virus levels’ of GDP in Q4 would still mean a 13 per cent fall in annual GDP in 2020 – the biggest quarterly economic contraction since 1908, worse than the financial crash and both world wars.
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