AG百家乐在线官网

Analysis

Coronavirus: A 14% fall in GDP would be unprecedented - but there is some good news

Despite the grim GDP forecasts, the Bank expects the country's economy to get back to pre-coronavirus levels by the end of 2021.

A man wearing protective face mask walks past the Bank of England in the City of London on March 30, 2020, as life in Britain continues during the nationwide lockdown to combat the novel coronavirus pandemic. - Life in locked-down Britain may not return to normal for six months or longer as it battles the coronavirus outbreak, a top health official warned on Sunday, as the death toll reached passed 1,200. (Photo by Tolga AKMEN / AFP) (Photo by TOLGA AKMEN/AFP via Getty Images)
Image: The Bank of England has published its latest forecast
Why you can trust Sky News

It is hard to get one's head round numbers like these.

A 14% fall in gross domestic product. We've never seen anything like that in our lifetimes.

Nor have we seen a 15% rise in gross domestic product - you have to go back to the earliest days of capitalism, the first decade of the 18th century, to see anything like this.

Please use Chrome browser for a more accessible video player

April: How can the economy get back to work?

Yet these are the numbers at the heart of the Bank of England's latest scenario for how the economy might perform in 2020 and 2021 respectively.

It's worth emphasising that word "scenario" at the start.

Source: BoE/ONS

This is not a forecast of the kind the Bank normally produces, with probabilities attached to outcomes, with fan charts and with a clear path for where it expects the economy, inflation, unemployment and so on to go, and there's a reason for that.

The scale of uncertainty is simply so high at the moment: producing even a "best guess" forecast would append a spurious illusion of certainty to the numbers.

More on Covid-19

So instead the Bank is producing a "scenario" much as the Office for Budget Responsibility did last month.

But this time around the scale of the annual changes in GDP are even greater than those mapped out by the OBR.

The good news is that while some had expected the Bank to warn of permanent "scarring" from the lockdown, with economic growth never getting back to "normal" levels, the Bank actually expects the economy to get back to close to its pre-crisis trend by the end of 2021.

:: Listen to the Daily podcast on , , ,

In other words, it may take some time but the Bank does think we will mostly get there, give or take some business investment which gets lost along the way.

However it points out, in what will be seen as a warning shot to Britain's banks, that the biggest risk facing the economy is that the banking system stops lending, causing a wave of insolvencies as the UK attempts to recover from the effects of the lockdown.

Please use Chrome browser for a more accessible video player

Three ways of interpreting coronavirus figures

In short, it is expecting an extraordinary ride for the economy in the coming year or two, but that after this rollercoaster experience in which GDP collapses and then recovers and unemployment spikes and then falls, we will be back in a more or less "normal" economy when it's all over.

Some economists would say that is an overly optimistic assumption.

But given the Bank says part of the reason for this profile are the extraordinary measures carried out by the Treasury - everything from lending schemes to companies to the furlough scheme for employers - the Chancellor might actually find this scenario something of a relief.