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UK economy could shrink 35 pct in Q2

Christian Fernsby |
Due to the impact of the novel coronavirus outbreak, Britain's gross domestic product (GDP) could fall 35 percent in the second quarter but will bounce back quickly, said the Office for Budget Responsibility (OBR) Tuesday.

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Topics: ECONOMY    UK   

As an executive non-departmental public body sponsored by the Treasury, the OBR forecasts that the British unemployment could rise by more than 2 million to 10 percent in the second quarter (Q2) "then declines more slowly than GDP recovers."

Meanwhile, the country's public sector net borrowing is expected to reach 273 billion pounds (about 343 billion U.S. dollars) in the period, which is approximately equal to 14 percent of GDP, marking the largest single-year deficit in Britain since World War II, said the OBR.

"The Government's policy response will also have substantial direct budgetary costs, but the measures should help limit the long-term damage to the economy and public finances - the costs of inaction would certainly have been higher," said the public body.

In terms of inflation, the OBR believes that "despite the very sharp fall in GDP, we have assumed that the effect on inflation is modest."

The British government has pledged in March to provide 330 billion pounds (about 415.8 billion dollars) of loans to businesses to support firms to get through the difficult moments as the coronavirus outbreak escalates in the country.

In addition, "more than 14 billion pounds (17.6 billion dollars) from the coronavirus emergency response fund will go towards public services, including the NHS (National Health Service) and local authorities involved in the fight against coronavirus," said the Treasury on Monday.

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