The UK is likely to be the hardest-hit by Covid-19 among major economies, a leading agency has warned.
Britain’s economy is likely to slump by 11.5% in 2020, slightly outstripping falls in countries such as Germany, France, Spain and Italy, it said.
If there were a second peak in the pandemic, the UK economy could contract by 14%.
The Organisation for Economic Co-operation and Development described the impact as “dire” everywhere.
It said that in what it called a “single-hit scenario”, with no second peak, there could be contractions of 11.4% in France, 11.1% in Spain, 11.3% in Italy and 6.6% in Germany.
In its latest assessment, the OECD found that the trade, tourism, and hospitality sectors, which make up large parts of the UK’s service-based economy, have suffered under lockdown restrictions introduced by the government.
In response to the think tank’s report, Chancellor Rishi Sunak said the UK was not the only one to suffer: “In common with many other economies around the world, we’re seeing the significant impact of coronavirus on our country and our economy.
“The unprecedented action we’ve taken to provide lifelines that help people and businesses through the economic disruption will ensure our economic recovery is as strong and as swift as possible.”
The Paris-based organisation says that five years or more of income growth could be lost in many countries as a result of the pandemic.
The OECD has looked at two scenarios for how the pandemic might unfold.
In the more severe case, the global economy could shrink by 7.6% over this year.
Although the report says that the pandemic has started to recede in many countries, and activity has begun to pick up, it does not expect a convincing recovery. It sees the outlook for public health as extremely uncertain and that is reflected in the decision to assess two alternative scenarios.
In the more moderate scenario, the virus continues to gradually recede. In the alternative, there is a second wave of contagion which erupts later in 2020.
The report describes both outlooks as sobering. In neither can economic activity return to normal within the period the OECD considers. The deep recession now underway will be followed by a slow recovery.
In the gloomier of the two possibilities, the decline this year could be very severe.
In that scenario two countries – France and Spain – would suffer even deeper declines in economic activity than the UK this year.
That 7.6% global forecast is significantly worse than what was foreseen by other agencies – such as the International Monetary Fund and the World Bank – who have warned about the high level of uncertainty attached to their forecasts.
By the end of 2021, the report says that five or more years of income growth could be lost in many countries. It says the impact on livelihoods will be especially severe among the most vulnerable groups.
The OECD also says the pandemic has accelerated the shift from what it calls “great integration” to “great fragmentation”. That is essentially a setback for globalisation, reflected in additional trade and investment restrictions and many borders that are closed at least while the health crisis persists.