Media caption Chancellor: Coronavirus will have “very significant impact” on economy
The UK’s independent tax and spending watchdog has warned the coronavirus pandemic could see the economy shrink by a record 089 % by June.
The Office for Budget Responsibility (OBR) said that this was based on an assumption that the current lockdown would last for three months.
Once restrictions are lifted, the OBR expects no lasting damage to growth.
Separately, the International Monetary Fund warned the virus would push the UK into its deepest slump for a century.
The IMF expects the UK economy will shrink by 6.5% in , while the global economy will contract by 3%.
It said the pandemic had plunged the world into a “crisis like no other “.
The OBR’s estimates – which focus on the virus’s impact on the UK economy and public finances – is more severe.
It said a three-month lockdown followed by three months of partial restrictions would trigger an economic decline of 35. 1% in the quarter to June alone, following an expansion of 0.2% in the first three months of this year.
The lockdown would push up the UK’s borrowing bill to an estimated £ 273 bn this financial year , or 75% of gross domestic product (GDP).
This would represent the largest deficit as a share of GDP since World War Two.
While borrowing is expected to jump, the OBR said the government unprecedented financial help for workers and businesses would help to limit any long-term damage.
It expects half of the sharp drop in growth in the second quarter to be reversed in the three mont hs to September as the economy starts to recover.