UK economy to slump 14% this year on coronavirus: Bank of England

Photo: AFP The facade of the Bank of England in the City of London.

British economic output is set to crash 14% this year owing to the coronavirus, the Bank of England said Thursday as it left its interest rate at 0.1 percent. UK gross domestic product would rebound by 15% in 2021 however, the BoE said following a meeting that took place Wednesday.

Following the COVID-19 outbreak, the Bank of England slashed its main interest rate to a record-low 0.1% and decided to pump £200 billion ($244 billion, €226 billion) into the UK economy to get retail banks lending to businesses at risk of collapse.

Two members of the nine-strong Monetary Policy Committee, but not governor Andrew Bailey, voted at the latest meeting to increase the stimulus by a further £100 billion.

"Without further monetary stimulus, there could be greater scarring effects on the economy via both demand and supply channels," Jonathan Haskel and Michael Saunders argued, according to minutes of the meeting.

For the entire year, the Bank of England forecast that GDP would plunge 14% despite picking up "materially in the latter part of 2020 and into 2021 after social distancing measures are relaxed".

After a sharp rebound of 15% in 2021, output is forecast to grow by 3.0% in 2022, the BoE added.

British Prime Minister Boris Johnson was on Sunday set to outline plans on easing Britain's nationwide lockdown, with initial restrictions expected to be lifted from next week.

The country's official virus death toll has overtaken Italy's to become the highest in Europe, with more than 32,000 fatalities related to COVID-19 - behind only the United States in the global tallies. It comes amid reports that finance minister Rishi Sunak is looking into tapering the government's furlough scheme that is paying UK workers stuck at home.

Latest government figures showed 6.3 million people were being paid up to 80% of their salaries, costing the taxpayer £8.0 billion.

IAG, the owner of British Airways and Spanish carrier Iberia, meanwhile said Thursday that it had fallen into a net loss of €1.68 billion ($1.8 billion) during the first quarter, as the pandemic grounded planes worldwide.

More on this subject: Coronavirus

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