It’s become clearer that the economic costs of the lockdown to contain the coronavirus will be huge. The plunge in the activity PMIs in March provide some tentative support to our view that GDP could fall by something like 15% q/q in Q2. The 1,500,000 new claims for the Universal Credit benefits scheme in the past four weeks suggest that the unemployment rate may have already jumped from 3.9% in January to around 5.5%. And we estimate that the combination of the weaker economy and the support packages put in place by the government will result in the public budget deficit rising by just shy of £200bn in 2020/21. That will push up the deficit from 2% of GDP now to almost 11% of GDP and will contribute to the debt to GDP ratio rising from 80% to 105%. So even if the coronavirus lockdown lasts just a few months and GDP rebounds fairly quickly, the full economic cost of the crisis will linger for many years.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services