Economic Forecast: Bank of England predicts UK GDP to drop nearly 30% in Q2 – Deloitte say mass unemployment could reduce wages

7 May 2020 (Last Updated May 7th, 2020 10:14)

7 May

The Bank of England said today that Covid-19 has dramatically reduced jobs and incomes in he UK with consumer spending in aggregate falling very significantly. In 2020 Q2, it is expected to be almost 30% lower than in 2019 Q4.

In addition the Bank of England predicts the UK GDP is expected to be close to 30% lower in 2020 Q2 than it was at the end of 2019.

UK GDP is expected to have fallen by around 3% in 2020 Q1 and then to fall by a further 25% in Q2.

S&P has said it expects GDP to fall by about 7.3% in the Eurozone and 6.5% in the UK this year, with a gradual rebound of 5.6% and 6% in 2021.

The ratings agency also said they see a larger economic risks, as outbreaks could resurge when lockdowns are loosened across the globe.

This week’s Deloitte global economic summary writes about the a risk of deflation.

Deloitte’s economists said: “Already we have seen a dramatic decline in the prices of oil and other commodities.

“Mass unemployment will likely mean downward pressure on wages.

“Although there have lately been shortages of some consumer staples (toilet paper, for example), early data indicates that inflation has decelerated.

“Even when recovery comes, the deflationary trend will likely be reversed only gradually.”