UK economy could shrink 14pc this year, budget forecasters say
LONDON, July 14: Britain's economy could shrink by more than 14per cent this year if there is lasting damage from the coronavirus, a scenario that would push government borrowing to nearly half a trillion dollars, budget forecasters said on Tuesday.
The Office for Budget Responsibility, whose projections are used by the government, said tax hikes or spending cuts would probably be needed to fix the huge hole in the public finances.
"The UK is on track to record the largest decline in annual GDP for 300 years, with output falling by more than 10per cent in 2020 in all three scenarios," the OBR said in a report.
"This delivers an unprecedented peacetime rise in borrowing this year to between 13per cent and 21per cent of GDP, lifting debt above 100per cent of GDP in all but the upside scenario."
The central scenario, with only moderate long-term damage, showed a 12.4per cent fall in output, with a 14.3per cent decline if the scarring is deeper.
In the downside scenario borrowing in the current financial year could hit 391 billion pounds ($490 billion), and in the upside one 263 billion pounds, with output falling 10.6per cent.
Last month, the International Monetary Fund said Britain's economy looks set to shrink by more than 10per cent this year.
The OBR scenarios do not incorporate gross national product data published on Tuesday, which showed a only a modest return to growth in May following the lockdown. -Reuters