The Bank of England predicts that we will face the worst economic downturn since 1709. The institution presented its opinion in its report, which it prepared for the government.
The Bank of England predicts a big crisis
The Bank of England has prepared a report on the UK’s economic outlook. The document was presented at the end of last week to Prime Minister Boris Johnson.
The central bank’s Monetary Policy Committee (MPC) “developed a probable example economic scenario” to illustrate the potential impact of the coronavirus crisis on the British economy. It has been noted that the current situation is unprecedented, so the economic outlook is “extremely uncertain.”
According to experts, we can expect the worst period for the economy since 1706. The British economy may shrink by as much as 14 percent. in 2020 alone, while total production will drop by almost 30% in the first half of 2020
Bank of England Governor Andrew Bailey told The Financial Times:
“A failure to lend would create a vicious circle of more bankruptcies and higher losses on loans that would come back to hit the banks themselves. If the system ensures a good supply of loans, we’ll get a better outcome.”
The central bank also predicts that the UK unemployment rate is likely to rise to 9%. in 2021, which means a higher unemployment rate than after the financial crisis of 2008-2009.
The Governor of the Bank of England added, however, that there is also a positive scenario. The economic bounce may take place “much faster than withdrawal from the global financial crisis.” The central bank assumes that long-term economic damage will amount to only 1.5 percent. gross domestic product. The bank also predicts that the economy may rebound as a result of the sudden V-shaped recovery, unlike the US and global economies.
More money supply
The bank also said that it is ready to introduce more money into the economy if needed. In March, he pledged to spend as much as £ 200 billion ($ 248 billion) to support the business by buying government bonds.
“This is a very aggressive shopping program … we have made a very clear commitment to do everything necessary to support the economy in line with the inflation target, ” said the governor.
Tim Shaler, former portfolio manager for PIMCO and current Chief Economist with iTrustCapital, believes the Bitcoin rally will extend past halving event.
“Despite the economic conditions globally, stock markets are up because the fiscal and monetary response has been strong. However, in the future, secondary effects of these policies may lead to inflation. If the economy bounces back quickly, those who hedged against inflation with Bitcoin and digital currencies will be happy they added those to their well-diversified portfolio.”
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